Protect the Comps!

[chad hampton]

Builder data and sales are so bad, I’m close to the point of not using any new builder sales comps.

 

[residentialguy]

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?

I would contact the builder and find out if the builder would deduct 12k from sale price if the buyer used his own finance and didn't need them to pay the concessions. That has happened with me, and they said, no. The price is the price. If the buyer needs us to pay for concessions, they will have to use our finance. Iow... We'll get that money back from them through financing. Therefore, nothing adjusted for concession.

 

[timd354]

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.

This is nothing new, they have been doing this for years.

 

[NC Appraising]

I would contact the builder and find out if the builder would deduct 12k from sale price if the buyer used his own finance and didn't need them to pay the concessions. That has happened with me, and they said, no. The price is the price. If the buyer needs us to pay for concessions, they will have to use our finance. Iow... We'll get that money back from them through financing. Therefore, nothing adjusted for concession.

Good point. Same here. If they do not use the preffered vendors they get nothing.



We are in a strange market. Buyer affordability is at a all time low, thus the need for the rate buydowns. Then you have low inventory with high demand.

Buyers are also being fed the theory that rates will decrease and they can just refi when the arm resets. All fine until prices declines or rates do not increase.

 

[NC Appraising]

This is nothing new, they have been doing this for years.

Do you think the GSEs and HUD will displine these new construction appraisers or make lenders buy back the loans if these loans go into default and the comps all had 20-30k in builder concessions and the appraiser made no adjustments? Most reports I see just say the good Ole typical for the market.

 

[timd354]

Do you think the GSEs and HUD will displine these new construction appraisers or make lenders buy back the loans if these loans go into default and the comps all had 20-30k in builder concessions and the appraiser made no adjustments? Most reports I see just say the good Ole typical for the market.

I have no idea what the GSE's and HUD may or may not do in the future. Additionally, many times the builder's concessions are hidden and are not detectable by any appraiser who is using these transactions as comps. This is most often done by builders buying bulk foward loan commitments at a below-market interest rate on a portfolio level basis with the below market interest rates being passed through to the home buyer. The other thing builders do is fund 2/1 or 3/2 interest rate buy downs on the mortgage on a transaction basis. When the seller concessions are done in this manner, they are typically completely undetectable by an appraiser since the mortgage note (which includes the interest rate) is not generally filed in the public records and this type of concession is not typically reported in the MLS. Additionally, in the case of a bulk forward loan commitment, that type of concession would not even appear on the closing disclosure (f/k/a HUD-1).

 

[NC Appraising]

I have no idea what the GSE's and HUD may or may not do in the future. Additionally, many times the builder's concessions are hidden and are not detectable by any appraiser who is using these transactions as comps. This is most often done by builders buying bulk foward loan commitments at a below-market interest rate on a portfolio level basis with the below market interest rates being passed through to the home buyer. The other thing builders do is fund 2/1 or 3/2 interest rate buy downs on the mortgage on a transaction basis. When the seller concessions are done in this manner, they are typically completely undetectable by an appraiser since the mortgage note (which inlcudes the interest rate) is not generally filed in the public records and this type of concession is not typically reported in the MLS. Additionally, in the case of a bulk forward loan commitment, that would type of concession would not even appear on the closing disclosure (f/k/a HUD-1).

You tha man! Wow, thanks for the detailed explanation.

I was wondering about that. If I went to the builders website and saw that they were offering rate buydowns, but I never saw it on the closing statement.