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Sale is LESS than what the appraisal comes out----

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Mary Caffey

Thread Starter
Sophomore Member
Joined
Feb 22, 2002
We must have some really good deals here where we are- we have been doing a few new home sales that the appraised price comes in way over the sales price......what to do? Have been relaying same to the LO and just continuing on- any other suggestions??

Mary
8O
 

graindart

Junior Member
Joined
Jan 20, 2002
Professional Status
Certified Residential Appraiser
State
Montana
Check to make sure that the market in your area isn't starting to drop......these new low sales will probably be the comparables you'll be using for appraisals in the near future.

If they're just flukes and market values aren't starting to decline in your area, get some money together and look for one of these underpriced puppies to buy and resell.
 

Dee Dee

Elite Member
Joined
Jan 16, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
Mary,

How long are these homes on the market before someone puts them under contract? If it's a short amount of time, say just a week or so, then it probably is a good deal. If longer, then your market may be changing.

Is it an arm's length transaction?

Is this in a new construction subdivision, where the builder is discounting inventory? If so, it's not a good sign.

How old are your comparable sales? Are they recent or are they sales that date back more than six months? If you use very recent sales, say within the past couple of months, does your estimated value drop?
 

Ben Vukicevich SRA

Senior Member
Joined
Feb 9, 2002
Professional Status
Certified General Appraiser
State
New Jersey
Mary,

Believe it or not, you will find in new home sales that what you're experiencing occurs on a random basis...well...when the big boys at the regional or national builder need to make the quarterly sales quota, they will give concessions to move the unit. Just like GM and Ford. Plus, those division sales managers want their end of the year bonus. That is the most important thing to them.

I love the ones I work for up here. Once they make the quota for the year, they'll will try like hell to delay November and December closings so they can use them to meet the next year's quota in January. If they add the closings to this year's quota, the main office will up the quota for next year so they delay closings and discount the units. I've seen homes that are complete just sitting there in December waiting until January to close. Or, if they are behind on their quota, which means they are likely to get fired by the main office for not meeting their quota, they will offer you a discount to close early. It seems to be a "unit" thing rather than a profit thing. Of course, then you have the builders that don't have a clue about market value. They are told by the main office what profit percentage they have to bring back on land and building and they just add that to the cost to build and price the home accordingly. If that's all the main office expects and they can sell below market value, they get to meet their quota very easily.. and they get their bonuses.

These guys never seem to learn that when they give a fast close or delayed close sales concession that reduces the sale price to make their bonuses, that it will come back to bite them when these same sales are used by the unsuspecting appraiser as comps...which is why FNMA/FHLMC want you to analyze sales from outside the subdivision..so you can see the affect of the sales concession and explain it.

Cruise through the option sheets sometimes and you will see things like "quick close discount" ,etc. Delayed close discounts are often disguised as major free option giveaways: free finished basements, free family rooms, free fireplaces, etc. They wouldn't want it to be too obvious to the main office that they were pushing closings off to the next year, would they????

Ben
 

Karl

Elite Member
Joined
Jan 15, 2002
Professional Status
Licensed Appraiser
State
Arizona
Have builder here as soon as he has four on market one gets discounted such a deal!! To bad they wouldn't slow down on the building process & put quality back in. Had a builder today I asked him, U notice anything in this area. No what? Your building a new home & without moving I count 9 for sale & that doesn't tell u something never mind the 5 Repo's within walkin distance. HIS reply; well MINE IS A BETTER HOME ok tell that to the AVERAGE Buyer. I fiqure he has a better group of Mexican's working for him.
 
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