Buying A Home
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Building a house/Appraisal ques

we agreed and signed the contract with our builder on the price...done

he recommends a mortgage broker to use, we liked him so we went with him.

They just got 2 appraisals in and both were about $25k LOWER than the price in our contract.  So no mortgage company will let him sell for higher.  The house is up and electric/plumbing are in - siding/windows, etc is done already.  our expected move in is supposed to be in may

I'm nervous he will hold the house till it can appraise higher....he's not a jerk, and i'm hoping this doesn't change anything ....waiting to hear what they say

has anyone experiences this?

Re: Building a house/Appraisal ques

  • There's no way your builder is going to hold onto a vacant house for years to wait for the market to come up $25k.

    While they're saying the market may have finally stabilized, it's still not supposed to begin improving for 2-3 years. 

  • usx4usx4 member
    Sixth Anniversary 100 Comments

    yea i get that too but orginally before we met with him he was building a house anyway (a different style) to rent....

    basically he doesn't need the money.  i'm not saying he'll do this, haven't even spoken to him yet as we just got the email from mortgage broker this evening

    i mean is $25k that much?  plus we are upgrading and paying for that stuff seperately...already have (i.e.; kitchen cabinets, cabinet lighting, stone exterior)

  • It depends on what your contract says.  I've seen a contract (while we were looking for a builder) that states the builder keeps the deposit and find another buyer, if we can't buy the house at the end due to any reason  including  not being able to secure a mortgage. 
  • The builder could agree to lower the price to match the appraisal so that you can get your loan and move forward. You should absolutely ask for that! Is your contract contingent on loan approval? If so, you can cancel and get your money back, which means the builder has an incentive to try and make it work with you so they don't have to find another buyer.

    No builder can control the appraisal - there are regulations that attempt to ensure fair, unbaised appraisals due to the Home Valuation Code of Conduct. So if you can't move forward, they could very well face this appraisal issue with the next buyer.

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  • usx4usx4 member
    Sixth Anniversary 100 Comments

    I'm going to have to retread our contract. I'm thinking all will be fine.  We shall see

    We secured a mortgage for the higher price we are all set.  They started building in February.  It's movin right along.  I guess. Bec the frame is up and all they did the appraisal.  He's a really nice guy and I'm sure he has probably came across this before    He a very reputable builder in the area


     Curious to see what he'll do and I mean it's appraising 25$k lower. But we already upgraded and gave him almost $10k more. Sooo he won't be loosing too much in the end .    Thanks for all the input I'll follow back with what happened

  • Unfortunately, low appraisals are a risk that fall on the buyer when you're in a declining market.

    The builder can sell you the house for any price he wants, even if a bank refuses to finance it.  The price on your contract is made up of the base price of the home, plus the COST off all upgrades.  Cost and appraisal value are very different things.  It might cost $10K to upgrade to hardwood, for example, but hardwood wouldn't be worth that much on an appraisal.  Upgraded finishes on plumbing...also another thing that costs a lot, but will not add much to an appraisal value.  

    Is this a large builder you're working with?

    Smaller builders might be willing to negotiate price...larger ones not as much.

  • Has it appraise $25k lower than the loan value or $25k lower than what you are purchasing for.  When we built our house the original appraisal (done before the house was completed) was $10k less than what we were buying for but $111k more than what our loan was so there was no issue.

    I would think as long as it appraises more than your loan, you won't have an issue.

     

  • image usx4:

    I'm going to have to retread our contract. I'm thinking all will be fine.  We shall see

    We secured a mortgage for the higher price we are all set. 

    I don't think it's as easy as you think it will be.  Because you secured a mortgage for the higher price -that's irrelevant. Banks/mortgage companies won't lend you more than the house is worth (aka the appraisal). There is a maximum amount that the loan to the value can be (96.5% for FHA, 95% for a 5% conventional etc).  Just because you were approved for a mortgage at $200k but the house apprised at $175k- they are not going to let you finance more than $175k (less whatever downpayment based on your loan).  You will either need to pay the difference in cash or the builder will need to drop the price to the apprisals.

    Im not sure how new construction works but maybe there is a later appraisal before closing so that everything is finished?  

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  • Edited by moderator.

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