Appraisal Question - PLEASE HELP

**newhousebuilder123** · 03-24-2009, 04:53 AM

When you have a house built and you sign a contract with the builder, does the appraiser suppose to get a copy of the purchase/building contract that was agreed upon by the buyer and seller when it is time for him to do an appraisal on the house for the bank? According to the builder, the appraiser is suppose to get a copy of the contract that basically outlines what the cost of the house will be plus profit. It that true?

**Codythebest** · 03-24-2009, 05:03 AM

No. Whatever you have on your contract, whatever the price you paid, whatever the builder charged, whatever the updates or anything else, the appraiser will value the property as a today fair market value.

It's not because you paid $1,000 for 10 oceanfront acres in Malibu and paid $20,000 to build your 20,000 s/f mansion on it that the appraiser should value the property at $21,000 because it's on the builder contract...and vice versa...

**Greg** · 03-24-2009, 06:12 AM

Yes, the appraiser is supposed to get a copy of the contract per the lenders requirements. Not to see what the price of the house is but to see if the seller/builder has made any concessions that would affect the price.

For instance, if the builder is giving you cash, a car or something of value back at closing to entice you to buy, then the lender would like to know this before they make the loan. The lender does not want to finance the builders/sellers incentive plan.

**newhousebuilder123** · 03-25-2009, 04:50 AM

I understand the appraiser gets a copy of the contract/purchase agreement, but I continue to get mixed answers from people concerning the true importance of it with regards to coming up with an appraised/FMV of the house. The way the builder acts is that the purchase price of the house (which we signed the contract over a 13 months ago) is a big factor in coming up with the appraised price of the house. When we had the appraisal done and showed him the appraisal (which was done by an approved appraiser from the lenders list) it came back just over a 100K less then the purchase agreement. Now we have an appraisal clause in the contract, but when the builder looked at the appraisal he tried to pick it apart. One thing he had issue with was one of the comparables used (actually he had issue with two), but with the one comp used it was a SPEC house in the same neighborhood that he sold for a very LOW, LOW price (this was closed on in February). And this house is pretty similar to ours. We are both all brick and we both are two stories with NO basement.

To me the builder is preaching to us that he has never seen an appraisal come in at a much lower value then the purchase agreement and he is making it out like the purchase agreement (cost plus profit) is weighted very heavily in coming up with the appraised value.

To me he is acting like his house he is building is immuned to what the market is doing.

**Greg** · 03-25-2009, 05:05 AM

There was a time when appraisals came in at the contract price. But, now appraisers are afraid to fudge anything.

Your builder can say whatever he wants about the appraisal but it is the lender he needs to be talking to. Lenders will only lend on the appraised amount.

You might want to try getting a second appraisal just to make sure the first one was not wrong.

**Codythebest** · 03-25-2009, 05:13 AM

If I follow Greg, with all the respect, and giving a dramatic example of a builder building a brand new home for $100K and giving back 5 cars of $20K each to the buyer as incentives, then the appraiser should put a ZERO dollar as FMV for the property, which makes no sense.
Whatever the incentives, a property has a FMV at any giving moment.

Sometimes, builders are selling their new homes for, let's say, $200K and give away driveway, appliances and/or furniture with their last homes to finish the project and move to the other one. Are these last home's value less than the others? Or maybe even more?

**newhousebuilder123** · 03-25-2009, 06:47 AM

This is a brand new neighborhood. Only about 7 houses are occupied. This will be about a 50 house neighborhood.

**Vegasloanlady** · 03-29-2009, 03:08 AM

All appraisal for a purchase transaction needs a purchase contract.

All appraisals for new construction news the builder sworn statement of costs, this includes the contract with the buyer/ customers.

This is to prevent fraud. If you own the lot the lender will use a sworn construction statement and if it cost him 20k to build you a mention and he charges a $500 "profit and overheard" then so be it. But I'm sure that will never happen.

In the case you're doing the general yourself, a sworn construction cost statement that is notarized will be use.

the lender will then set-up draws and only release money base upon completion of certain phrases like foundation, framing, etc. Indymac use to have a goog construction to prem- too bad they went under..