Protect the Comps!

[NC Appraising]

How builders are inflating the market.....one big shet show.

The GSES and FHA allows for SC but then want us to deduct them?....the gses appear to be cracking down on sc, but some of their guidelines are still questionable..

Appraisers are using the "typical" loophole to not make SC. Which is not correct. Virtually all means resale, new homes, etc. Forever....typical is not now because builders are using SC to inflate the market and to protect the comps.

Builders own the lender or have their preferred lenders. Lenders are giving buyers 2-4 k if they use the builder owned lender or preffered lender.

Investors are buying lennar homes for $330k and getting money back from lennar. TO protect the comps.

The average cost for a builder is now 13% in buydowns, etc.

Starts at 13:50 as with anything on the internet, I approach it as reality TV show. That being said, watch it and judge for yourself.

 

[NC Appraising]

MY question is Are builders hiding the large rate buydowns from appraisers? Most builders in my market are not putting the homes on the MLS.

If they do, they are cherry picked.

 

[Mark K]

Stopped by a new home sub the other day out of curiosity. Base model, as cheap as you can get (1 story, 1750 sq.ft.), $365K. However, they'll give you a $5K "incentive" if you use their mtg. company and another $10K discount for not having a realtor referral, Plus, they were having a "special" another $10K discount for the month of March. I asked about getting their mtg. and paying it off the next month? Didn't care, just use our mtg. company.

 

[Terrel L. Shields]

However, they'll give you a $5K "incentive" if you use their mtg. company and another $10K discount for not having a realtor referral, Plus, they were having a "special" another $10K discount for the month of March.

Harkens back to the days of the choice - Bass Boat, Hummer, 6 months payments, world cruise, or one-year weekly maid service. Just thrown in free, and borrow 105%...

 

[Mark K]

Harkens back to the days of the choice - Bass Boat, Hummer, 6 months payments, world cruise, or one-year weekly maid service. Just thrown in free, and borrow 105%...

Plus, you'll get a 3% interest rate. Just ignore that small print that says its a negative-am mortgage. Every year your principal balance goes up.

Just like the annuities hawked on the radio today. Guaranteed 8% return. They don't mention that it's an 8% return OF your money, not ON your money. Nor do they mention the 5-8% commissions the salesmen charge.

 

[alebrewer]

If they do, they are cherry picked.

I know for a fact that this happens. Just visited with a larger regional builder in the Dallas area that flat out told me that. The sale that had $40k in concessions doesn't make it to the market. The one that had $0 concessions is the one that gets put into MLS. And Texas is a non-disclosure state, so sale prices don't even get recorded if the sale wasn't listed through MLS.

 

[NC Appraising]

I know for a fact that this happens. Just visited with a larger regional builder in the Dallas area that flat out told me that. The sale that had $40k in concessions doesn't make it to the market. The one that had $0 concessions is the one that gets put into MLS. And Texas is a non-disclosure state, so sale prices don't even get recorded if the sale wasn't listed through MLS.

That's crazy.

The GSEs need to share data, especially on new construction.

I use the data share on alamode, but there are few new construction sales.

What's funny is that some AMCs require 2 MLS sales for new construction homes LOL. dumb arse appraisers will use the same old cherry picked MLS sales over and over again.

My score was actually lowered by one AMC because I used two builder provided sales (I actually went to the county website for off MLS sales and then contacted the builder for data).

I got dinged for that.

I'm just happy to see all playing together...
Builder owns lender, or have preffered lenders, lender offers goodies if they use them, builder gives re agents bonus, lenders/AMC have preffered panels and the GSEs and FHA allows for these rate buydowns.

All is OK when the market is appreciating.

One big happy family.

 

[Overimprovement]

This thread is why I never could get into appraising new subdivisions. Too many shenanigans. If you provided genuine market values, reflective of all the concessions, etc, you might be doing your last appraisal in that subdivision. The only ones I ever did were resales, and they tended to sit awhile, even in seller's markets. Without the builder offering the moon, the market did not see the value.

The other issue I saw is the $5000 'upgrades' that actually cost $1000. Or less. So long as the buyer had some wiggle room in the credit ratios, they didn't care about that extra $35/month payment. But many didn't have any wiggle room, barely qualifying as it was.

R**n Homes were the worst. A large % of the homes were so basic because everyone was just barely qualifying, and couldn't afford such 'upgrades' as a window on the west side (so many of their homes have ZERO windows on at least one side of the house, some actually two sides), 'deck prep' packages (basically just ledger boards--you supply the deck later), or garages with actual walls.

Oh, you wanted hot AND cold running water? Let me get out my calculator...how much do you earn again?

 

[Salty]

I remember back in the day when a borrower would try to refi their home in a development where the builder was still selling identical homes. When you remove the concessions, the sale prices are less than what they owe on their home they bought within the last year or so resulting in an angry borrower. Have to explain why would a buyer pay $700,000 for your 1 year used home when they can get an identical model new home for a net price of $675,000 currently being offered by your builder (there are literally 5 for sale)

 

[NC Appraising]

I appraise in the CBD area of Charlotte where on average, there are 117 people a day moving to this area.

Some may find this hard to believe, but just because builders are giving SC, that doesn't mean they have to be adjusted for.

Appraisers just need to stop saying "typical". Typical is a loophole that does not exist. Others will just make a full mechanical dollar for dollar.

As a real world example:
3 closed new construction sales in a pud development.

1st sale went with builders lender and the builder paid 12k for SC. Sale price $600k.

2nd sale went with outside lender and builder paid 0 in SC. Sale price $600k

3rd Sale cash buyer paid $600k.

Would you deduct 12k from Sale 1?

When there is a high demand and a low supply the above is plausible. NOW, in the first time buyers segment, the above mostly does not apply and is opposite.

"The adjustments for Seller concessions for sales reflects the difference between what the comparables actually sold for with the sales concessions and what they would have sold for without the concessions"

Has nothing to do with typical. Virtually all in my market is maybe for a home warranty. I can't think of anything else where Virtually all sellers pay something for all transactions (cash, FHA, conv, resale, new construction).

Why did the 2nd buyer go with a outside lender? I mostly hear could not get approved or for a lower rate.