Appraisal Question....

**newhousebuilder123** · 03-24-2009, 04:47 AM

Quick story and then my question.....

I recently had an appraisal done on a new home I am building in a new neighborhood. This house is not quite complete but is probably about 30 days away from being complete. We were concerned with what the market value of the house would be in qualifying for a loan and making sure we pay a fair price. Recently, the builder sold one of his spec homes for a very big discounted price in the same neighborhood. After he saw this appraisal coming in MUCH, MUCH lower then what the house will cost with construction cost + profit, he said the appraiser should not of used the spec home as one of the comps. His reasoning was he wanted to get that spec house off his books and called it a "distressed property" because it has been sitting there for almost 2 years. The appraiser said it needs to be used because it is very similar to our house.

What constitutes a spec home being considered a "distressed property"? To me it does not make sense that the builder can say that house should not be used as a comp because it is what he calls, "distressed".

Please HELP!

**ryanallen** · 03-24-2009, 11:59 AM

The textbook definition of a comparable sale is similar type home in similar condition that sold in the last 90 days. if nothing is found then you can sometimes go out 6 months to find a good comp. Does the spec house fit the description?

**newhousebuilder123** · 03-24-2009, 12:14 PM

The spec home is very comparable. It is an all brick home just like the one we are building. It is a LITTLE smaller square footwise but all in all its an all brick house two story just like mine. The builder says that spec home should not be used because he is calling it distressed and wanting to get it off his books so he does not have to keep paying on it monthly. The house was closed like 4 or 5 weeks ago.

**Codythebest** · 03-24-2009, 04:31 PM

It's not a distress property.
Fannie Mae now uses 1004 MC Market Conditions analysis form from appraisers to distinct FMV and distress properties. My guess is it will be a standard soon or later.
But a builder or anyone for that matter thinking that their property is a distress sale because it sat for 2 years, or because granma is too old, or because the Lakers are too strong is not a valid parameter to make it distressed IMO....

**MinnesotaPropertiesOnline** · 03-24-2009, 07:04 PM

Appraisals are based on principle of substitution. Meaning the value of a property tends to be set by the price that would be paid by an equally desirable sustitute. The spec home is probably a good substitute in the eyes of most buyers.

**Greg** · 03-25-2009, 05:16 AM

Your builder shot himself in the foot by selling that property at a discount. Now he will have to sell the rest of them at the same discount, if he wants to get a lender involved.