Objective appraisals?

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1sttimebuyer_IHB

New member
Hi,

I'm a long time reader, first time poster.

Thank you to everyone for all the advice you've offerred so far and any clarification you can offer regarding the appraisal process.

If you use the builder's lender to capture the "incentive dollars" are you required to use their appraiser? Technically, wouldn't there be an inherent conflict of interest for a builder/lender appointed appraiser to make an objective appraisal?
 
1sttimebuyer-

I'm also a first time poster, and I've really been enlightened by the contributions of many of the regular posters here. I apologize I don't have an answer to your question- I wanted to piggyback your question with one of my own as it is somewhat related. Have any of you had experience with buying new homes (price negotiation, loan advice, etc) and can incentives offered by builders be used to prepay HOA dues? Sorry again for piggybacking...maybe I should start a new thread. Thanks in advance for any replies.
 
kb24 -

I personally haven't had any luck getting a price break from the published price. The reasoning they generally give is that the price is fixed, but you can use your incentive dollars against the price. I think you can do up to two years of HOA's - would recommend maximizing this option. And from there you can allocate towards the price, designer credits, buying down points, or closing costs...

After HOA's, we thought buying down points would be most beneficial because it helps most for monthly payments - but then you get stuck with a perpetual tax bill...

But then, we thought if we lower the price of the home or offset the price with designer credits - we lower the appraisal hurdle... technically if the house doesn't appraise for full "builder value," would the contract be valid? Technically, shouldn't a lender refuse to fund a loan for an overvalued house?
 
That's a good point. I think lowering the price would be the next best option if you are indeed right that the appraisal would come back lower. Then again, it all comes back to your original question whether or not there is such a thing as an objective appraisal.
 
For the appraiser question. Yes you can use your own appraiser. If you do make sure he/she has extensive knowledge of the new home market and even better that community. I had a few people insist on using their appraiser (probably their brother or cousin) who didn't know how to do a new home appraisal. I would get the appraisal and look at it and tell them to make some corrections. Then the underwriter would look at it and need more corrections. One I called and asked for the 442. He asked me what's a 442? This was a very bad sign. So you are taking on a lot of risk if you just call someone out of the phonebook because it could cause for the lender to deny the loan. Is it a conflict for the builder/lender to use their appraiser? Kind of a grey area. The value will come in and you won't have any problems with it. Does that mean that the value is inflated? The appraiser and builder better hope not as that would be a nasty lawsuit.

On discounts get the lower price. Find out how many points they are willing to pay for on the loan and what the payments would be. Then ask without those points what loan amount/purchase would have the same payment? Now you have a new price to work with. Yes a lender wouldn't even approve a loan for an overvalued house. But what happens when the price goes down after the purchase? Just get the lower price.
 
I like your idea about finding a purchase price for the same bought down payment - but am not sure the builder would be willing to lower that much without cause.

Our thought process may be off - but we were thinking it would be best to allocate towards paying down the interest rate- leaving value as is...

If property appraises for full value - great - everyone is happy.

If the house doesn't appraise for full value - wouldn't that be cause for price renegotiation? If lender can't approve the loan and buyer has only agreed to buy if builder's lender approves loan (has already preapproved buyer) - isn't it in the builder's best interest to lower the price to keep the deal from falling through?

Does that make sense or is it just wishful thinking?
 
"I like your idea about finding a purchase price for the same bought down payment - but am not sure the builder would be willing to lower that much without cause." Lets say the price is $500k with 20% $100k down and they are paying two points $8k so the rate is 6.5% but with the points it is 5.75% the payment is $2334. What would the purchase price be with $100k down no points with a rate of 6.5% and a payment of $2334? The price would be about $475k which would have a payment of $2370 a month. So would you rather have the builder give you $8k or $25k? Would they drop the price that much? Yes you need to be the one in charge. This isn't 2005 anymore.

"If property appraises for full value - great - everyone is happy." Yeah until the guy in the next phase makes them drop the price $25k because that was a better deal. See http://www.irvinehousingblog.com/2007/03/24/bitter-buyers-say-williams-lyin/

"If the house doesn't appraise for full value - wouldn't that be cause for price renegotiation?" True but it will appraise for the purchase price. Trust me.

I can give you a thousand scenarios of why getting them to drop the price will be the better deal. If you don't someone else will and you will have lost "equity" right off the bat. If the payment is the issue then you may be buying too much house.
 
graphrix,

thanks for the advice.

unfortunately, may be too late for us. we've already gone into escrow and appraisal scenario was last ditch effort to get last minute negotiations in.

in any event, hope other members are able to take advantage of your advice and have better luck in the negotiations...

don't feel too bad for us - we're in it for the long haul(no flipping here) and accepted that it'd be an ugly few years when we signed the contract --- with that said, we're only human and are open to any LEGAL suggestions on picking up any $ we may have left on the table

thanks.
 
If you do know that the builder lowered the price in the next phase you can go back and renegotiate. Sorry after the close of escrow you are out of luck. You can try but in the 90s William Lyon said sorry you get nothing and he is saying the same thing today. If your long haul is 10 years you should be fine if you factor in inflation.

I didn't want to be a renter any longer in 2002 either so I bought. I wouldn't buy in this market no matter how large the incentive. You should check out the topic I started http://forums.irvinehousingblog.com/discussion/207/a-real-realtor/#Item_1 with a Realtor who says the same thing myself and may others on this board are saying.
 
Graphrix - Brilliant advice on lowering the price. I never would have thought of it. I'll pocket that for use in '08 or '09 (assuming the incentives are still available then).
 
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