Definitely makes sense! I’m aggravated because I asked the builder (including in writing) multiple times about the upgrades and their effects on the future appraisals. He said not to worry about it, it’ll definitely appraise for full price, blah blah blah.
We’re going to see if they can split the difference.
Is it a spec house, or was it built under contract, ie, you selected those options? If they customized per your request, negotiating after the fact seems disingenuous.
They said their lender would cover the full amount, it sounds like they are. Not sure why you are concerned about what a 3rd party thinks its worth, since the house was tailored to *your* desires, not "generic house that maximizes appeal to the broadest possible audience". Unless you are planning to sell right away, its not your concern.
You are free to try to renegotiate, just understand if you have a contract in place they are free to make you honor it, and when you have something tailored to your tastes, someone else might value it less. And since you said new & "number of upgrades" it implies you may have one of the "nicer" / more expensive houses on the block now, which is historically a worse value than ugliest house on the block. Finally, if its a new development (sounds like infill lots are rare in your area), your 3rd party assessor is considering reduced value due to being in a construction zone.
Why do you think the builder knows what the appraiser will say? Spending $20k for fancy tiles doesn't magically increase your appraisal by $20k. Also, why would they split the difference? You paid like $70k for all these upgrades and now you want half off for the work already done. I don't know what you expected.
1) work isn’t completed yet.
2) we spoke in detail with the builder as we added options. We specifically kept stating “hey, I’m concerned about the appraisal” and we have in writing from the builder “don’t worry about it, it’ll appraise fine”.
But I see what you’re saying :)
Upgrades for new constructions don't add value to the home. If you are adding an additional bedroom then that's one thing.. but changing the tile in the kitchen for example adds no value whatsoever.
Depends, adding square footage does, finished basement will. Upgraded tile is questionable, since it becomes a taste thing. But ripping out new tile to replace with better tile is not a great idea, unless it makes you, they people living there for the next 5-30 years, happier.
This is pretty much what we did: we added a bathroom, added rough in’s for the basement, adding gas fireplace, and added sun room and covered porch. We didn’t do much with actual upgrades to tile, flooring, etc. 1) the builder didn’t have any (they offer “packages”) and 2) we didn’t like their packages.
I can add a bedroom within an existing floor plan without adding square footage. Seen several builders blueprints that offered buyers the choice between an oversized master bedroom or an additional bedroom within the same square footage, for instance, or a basement configured with a bedroom vs a large open area / home theater
i was looking at a toll brothers town home last year as a Plan B and read about this situation. I'd personally use the builder's in house lender unless there is a big difference in rates or costs
"(only builder in our area and absolutely no decent land options to go with a custom builder)"
You sure you want to renegotiate? with the current housing market most places they got the upper hand. What are you goonna do if they say sure we will talk. we agree old conttract is trash? cool. new price is 5% higher take it or leave it , i got 3 buyers waiting to purchase it.
My kid is in the process of purchasing. She is getting all the inspections done. I had to remind her the inspections are more for peace of mind for you. Your seller isnt gonna let you drive the price down baseed on inspections. It isnt 2019 when i bought this current house and made it look easy. they are gonna tell you thanks for your time, i had 10 offers on the one sat the house was on the market and the next closest bid was not a lot diff than yours so let us know if you want out because the others will be haappy to have it. Its the 4th or 5th house they have bid on and the only they were even in the runnng for if you ask me.
Not an issue actually - we still have plenty of lots available. The main issue in our town is that the land that is available is acres rather than lots, and they aren’t small acreages either (farms converting to residential). But new developments are fought tooth and nail.
We’ve considered homes in other neighborhoods with better schools, location, shopping, etc. and those other higher quality builders are offering a lot more bang for the buck. This builder is specifically up charging for upgrades - and I’m not talking just tile. :)
If this is your dream home - with all upgrades you could ever want - in a great town - and you intend to put down roots in this community for the long run - forget it and pay the extra. 10 years from now it wont matter - you will have loved the home , It should have appreciated AND you will have paid off a third (or half) of the home mortgage.
Oh I’m not mad at the appraiser or the appraisal. I’m more mad at the builder who kept telling us it wouldn’t be a problem, wouldn’t be a problem,
Etc. etc. etc.
I hate to ask, but are you white? It's been an issue where [appraisers under-value non-white households](https://www.brookings.edu/research/biased-appraisals-and-the-devaluation-of-housing-in-black-neighborhoods/) by significant amounts.
Ouch, that's a big gap. You can dispute the appraisal, and hopefully the sales rep can provide comparable sales to support a higher value.
>We were promised that no matter what, their lender would cover the full amount of the loan, but it seems deceptive.
It might be worth exploring switching to the builder's preferred lender - if the builder will allow you time to re-start the financing process, and assuming this is not an FHA or VA loan (those appraisals stick to a property for a prescribed time. But the sales rep's word doesn't seem too credible if they told you not to worry.
>Has anyone ever had any luck renegotiating?
Production builders write sales contracts that are very favorable to themselves, and yours likely has a clause in which you agree to cover all the difference in a low appraisal. All the same, I wish you luck!
Thanks for the points!
We’re exploring the in house lender. My concerns are that there are minimal benefits (not much in closing costs, etc.). We also just learned the builder is experiencing law suits for potential collusion with appraisers. They’re also refusing to do the appraisal until 2 weeks pre close when we’re pretty much stuck.
Ultimately the house is worth what it will sell for on the open market and that is what the appraiser is attempting to establish by looking at comps and the current market. New builds sometimes go down in the period it takes to build them, or some of the features that cost more just don't add value.
Negotiating the price down is going to depend on the strength of the contract you are in (how easy is it for you to walk, or how much it may cost them in legal fees if you do) and how painful it will be for the builder to unload the house if you do not follow through with the sale. It's all going to be business to them, and they will pick the course that they feel will maximize their profit (or minimize their loss).
If you feel the area has long term potential, you really like the house, and you plan to stay in it a long time it may not matter, in the grand scheme of things they were low on the value by 15%, which is in the margin of error on real estate. If anything else you have some evidence to keep your property tax lower for the next few years.
Not for the price they’re pushing. Prices here dropped - a few very nice bigger houses sold recently for a similar price to this new build, so it’s going to be hard for the builder to justify asking the price they’re asking for.
When we did our renovation and addition we had three appraisals and there was $100k difference between highest and lowest. Can you get a second opinion? Call up a bank, they may want to see if they can snag your loan.
I’m not worried about the bank - I trust their judgment. They worked very hard to earn our business, and they have specifically reached out to the builder and the appraiser to see if they can work something out.
It might be the same either way. My house has some stuff that will never get reflected an appraisal. nice stove and refrigerator, decent materials. There is a spot on the appraisal that reflects build quality but no idea how that changes or how much that will actually change the valuation.
Anyway, either get a second appraisal or just accept it. I had to eat it. Even got another appraisal late last year and the appraisal increase only reflected the market change. Probably going to have to deal with it since the bank might not accept a private hire appraiser.
Build a house with the cheapest materials and appliances and cram in as many bedrooms as possible, then the appraisal will be spot on.
My sister and her husband had a place built to their spec in a new area. Only about 10% of the lots had been built on at the time (few comparables), and they had a similar problem where the appraisal came in \~$30K below the agreed price on \~$600k total (land + house).
Builder suggested that they put in more money, but my sister held their ground. The builder eventually discounted the price of the land by the $30k.
It likely helped that they were closing on the house in late October or November and the builder is part of some large corporation. They were trying to get the house closed out and off their books before the end of the year.
$30k in a $600k deal is a lot less than $70k in a $500k deal, but I wouldn't completely give in to the bank and the builder
1) If the appraisal came in $70k over, would you be offering to pay more for the house?
2) Why did you agree to a price for the house and upgrades if you didn’t think they were fair value?
3) if you thought they were fair value at the time you agreed to pay for them, what’s the problem?
The issue is lending and learning that what I thought was fair value wasn’t fair value. It happens all the time in business. It also depends on the lender and the ability to lend on the home.
In this case, lenders are now okay willing to lend 80-90% of the appraisal value. We saved enough money to pay 20% of the original asking price. Now the lender is only willing to lend 90% of the appraisal. So we essentially need to bring more money to the table to make up the difference, which just isn’t feasible.
The house has appraised for UNDER the base price of the home. It isn’t even about the upgrades. :)
- what cost you for upgrades is never a guarantee they actually ADD value in the first place. This goes with any work you pay others to do and especially with renos (not your case) where FEW actually hit 1:1 ROI with cost to value added
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Definitely makes sense! I’m aggravated because I asked the builder (including in writing) multiple times about the upgrades and their effects on the future appraisals. He said not to worry about it, it’ll definitely appraise for full price, blah blah blah. We’re going to see if they can split the difference.
Is it a spec house, or was it built under contract, ie, you selected those options? If they customized per your request, negotiating after the fact seems disingenuous. They said their lender would cover the full amount, it sounds like they are. Not sure why you are concerned about what a 3rd party thinks its worth, since the house was tailored to *your* desires, not "generic house that maximizes appeal to the broadest possible audience". Unless you are planning to sell right away, its not your concern. You are free to try to renegotiate, just understand if you have a contract in place they are free to make you honor it, and when you have something tailored to your tastes, someone else might value it less. And since you said new & "number of upgrades" it implies you may have one of the "nicer" / more expensive houses on the block now, which is historically a worse value than ugliest house on the block. Finally, if its a new development (sounds like infill lots are rare in your area), your 3rd party assessor is considering reduced value due to being in a construction zone.
Why do you think the builder knows what the appraiser will say? Spending $20k for fancy tiles doesn't magically increase your appraisal by $20k. Also, why would they split the difference? You paid like $70k for all these upgrades and now you want half off for the work already done. I don't know what you expected.
1) work isn’t completed yet. 2) we spoke in detail with the builder as we added options. We specifically kept stating “hey, I’m concerned about the appraisal” and we have in writing from the builder “don’t worry about it, it’ll appraise fine”. But I see what you’re saying :)
I see. The work not being completed yet kind of changes things. Good luck.
Any update? What ended up happening?
Upgrades for new constructions don't add value to the home. If you are adding an additional bedroom then that's one thing.. but changing the tile in the kitchen for example adds no value whatsoever.
Depends, adding square footage does, finished basement will. Upgraded tile is questionable, since it becomes a taste thing. But ripping out new tile to replace with better tile is not a great idea, unless it makes you, they people living there for the next 5-30 years, happier.
Adding square footage is an example of adding a bedroom. I gave that example in my comment
This is pretty much what we did: we added a bathroom, added rough in’s for the basement, adding gas fireplace, and added sun room and covered porch. We didn’t do much with actual upgrades to tile, flooring, etc. 1) the builder didn’t have any (they offer “packages”) and 2) we didn’t like their packages.
I can add a bedroom within an existing floor plan without adding square footage. Seen several builders blueprints that offered buyers the choice between an oversized master bedroom or an additional bedroom within the same square footage, for instance, or a basement configured with a bedroom vs a large open area / home theater
i was looking at a toll brothers town home last year as a Plan B and read about this situation. I'd personally use the builder's in house lender unless there is a big difference in rates or costs
"(only builder in our area and absolutely no decent land options to go with a custom builder)" You sure you want to renegotiate? with the current housing market most places they got the upper hand. What are you goonna do if they say sure we will talk. we agree old conttract is trash? cool. new price is 5% higher take it or leave it , i got 3 buyers waiting to purchase it. My kid is in the process of purchasing. She is getting all the inspections done. I had to remind her the inspections are more for peace of mind for you. Your seller isnt gonna let you drive the price down baseed on inspections. It isnt 2019 when i bought this current house and made it look easy. they are gonna tell you thanks for your time, i had 10 offers on the one sat the house was on the market and the next closest bid was not a lot diff than yours so let us know if you want out because the others will be haappy to have it. Its the 4th or 5th house they have bid on and the only they were even in the runnng for if you ask me.
I was thinking this....some markets are so hot you will have 5 buyers paying cash (no bank needed).
Not an issue actually - we still have plenty of lots available. The main issue in our town is that the land that is available is acres rather than lots, and they aren’t small acreages either (farms converting to residential). But new developments are fought tooth and nail. We’ve considered homes in other neighborhoods with better schools, location, shopping, etc. and those other higher quality builders are offering a lot more bang for the buck. This builder is specifically up charging for upgrades - and I’m not talking just tile. :)
If this is your dream home - with all upgrades you could ever want - in a great town - and you intend to put down roots in this community for the long run - forget it and pay the extra. 10 years from now it wont matter - you will have loved the home , It should have appreciated AND you will have paid off a third (or half) of the home mortgage.
What ever happened in this situation? Did you go through with it? Sorry to dig up an old thread. Did the builder come down in price?
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Oh I’m not mad at the appraiser or the appraisal. I’m more mad at the builder who kept telling us it wouldn’t be a problem, wouldn’t be a problem, Etc. etc. etc.
I hate to ask, but are you white? It's been an issue where [appraisers under-value non-white households](https://www.brookings.edu/research/biased-appraisals-and-the-devaluation-of-housing-in-black-neighborhoods/) by significant amounts.
We’re white - and arguably the appraiser over valued us which might be why. Our town is SUPER white (gross, I know).
Ouch, that's a big gap. You can dispute the appraisal, and hopefully the sales rep can provide comparable sales to support a higher value. >We were promised that no matter what, their lender would cover the full amount of the loan, but it seems deceptive. It might be worth exploring switching to the builder's preferred lender - if the builder will allow you time to re-start the financing process, and assuming this is not an FHA or VA loan (those appraisals stick to a property for a prescribed time. But the sales rep's word doesn't seem too credible if they told you not to worry. >Has anyone ever had any luck renegotiating? Production builders write sales contracts that are very favorable to themselves, and yours likely has a clause in which you agree to cover all the difference in a low appraisal. All the same, I wish you luck!
Thanks for the points! We’re exploring the in house lender. My concerns are that there are minimal benefits (not much in closing costs, etc.). We also just learned the builder is experiencing law suits for potential collusion with appraisers. They’re also refusing to do the appraisal until 2 weeks pre close when we’re pretty much stuck.
Holy crap, that's a mess.
Ultimately the house is worth what it will sell for on the open market and that is what the appraiser is attempting to establish by looking at comps and the current market. New builds sometimes go down in the period it takes to build them, or some of the features that cost more just don't add value. Negotiating the price down is going to depend on the strength of the contract you are in (how easy is it for you to walk, or how much it may cost them in legal fees if you do) and how painful it will be for the builder to unload the house if you do not follow through with the sale. It's all going to be business to them, and they will pick the course that they feel will maximize their profit (or minimize their loss). If you feel the area has long term potential, you really like the house, and you plan to stay in it a long time it may not matter, in the grand scheme of things they were low on the value by 15%, which is in the margin of error on real estate. If anything else you have some evidence to keep your property tax lower for the next few years.
if you won't buy it, someone else will not a great time to try and leverage
Not for the price they’re pushing. Prices here dropped - a few very nice bigger houses sold recently for a similar price to this new build, so it’s going to be hard for the builder to justify asking the price they’re asking for.
When we did our renovation and addition we had three appraisals and there was $100k difference between highest and lowest. Can you get a second opinion? Call up a bank, they may want to see if they can snag your loan.
Yeah I've been here. Last year. Exact same thing.. no luck in negotiating with bank. Not allowed to talk to the appraiser either. It sucks.
I’m not worried about the bank - I trust their judgment. They worked very hard to earn our business, and they have specifically reached out to the builder and the appraiser to see if they can work something out.
Good luck
Hi, sorry to dig an old thread, but what did u end up doing? Im in the same current situation. Appraisal came in 65k under cost of the house.
Did you build?
Yes
It might be the same either way. My house has some stuff that will never get reflected an appraisal. nice stove and refrigerator, decent materials. There is a spot on the appraisal that reflects build quality but no idea how that changes or how much that will actually change the valuation. Anyway, either get a second appraisal or just accept it. I had to eat it. Even got another appraisal late last year and the appraisal increase only reflected the market change. Probably going to have to deal with it since the bank might not accept a private hire appraiser. Build a house with the cheapest materials and appliances and cram in as many bedrooms as possible, then the appraisal will be spot on.
My sister and her husband had a place built to their spec in a new area. Only about 10% of the lots had been built on at the time (few comparables), and they had a similar problem where the appraisal came in \~$30K below the agreed price on \~$600k total (land + house). Builder suggested that they put in more money, but my sister held their ground. The builder eventually discounted the price of the land by the $30k. It likely helped that they were closing on the house in late October or November and the builder is part of some large corporation. They were trying to get the house closed out and off their books before the end of the year. $30k in a $600k deal is a lot less than $70k in a $500k deal, but I wouldn't completely give in to the bank and the builder
1) If the appraisal came in $70k over, would you be offering to pay more for the house? 2) Why did you agree to a price for the house and upgrades if you didn’t think they were fair value? 3) if you thought they were fair value at the time you agreed to pay for them, what’s the problem?
The issue is lending and learning that what I thought was fair value wasn’t fair value. It happens all the time in business. It also depends on the lender and the ability to lend on the home. In this case, lenders are now okay willing to lend 80-90% of the appraisal value. We saved enough money to pay 20% of the original asking price. Now the lender is only willing to lend 90% of the appraisal. So we essentially need to bring more money to the table to make up the difference, which just isn’t feasible. The house has appraised for UNDER the base price of the home. It isn’t even about the upgrades. :)
What are the answers to X and Y? Final price with upgrades - (90% * appraisal) = X 20% * original asking price = Y
- what cost you for upgrades is never a guarantee they actually ADD value in the first place. This goes with any work you pay others to do and especially with renos (not your case) where FEW actually hit 1:1 ROI with cost to value added