Author Topic: VA Appraisal Low on New Build  (Read 7901 times)

Booma

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VA Appraisal Low on New Build
« on: September 29, 2014, 06:35:34 PM »
It may not be very mustachian, but this is my first home and we are buying a new build. I am obviously new to all this and I thought there might be some collective wisdom in the wonderful community here. I was under contract before realizing a mustache based existence was a possibility, but I think I can successfully stroke my peach fuzz for spending less than 50% of my eligible amount on my house while remaining within biking distance of the school and both workplaces.

Anyway, without further ado...We are scheduled to close 10/7 and the appraisal just came back at $326,000 on our agreed price of $329,600. We were supposed to close by 10/3 per contract and builder pushed it to 10/7 due to city inspector delays. I'm already missing my 45 day rate lock, which will probably cost me $400-500 in fees.
 
I am meeting the builder tomorrow to discuss the issue and I hoped to get some information. I have a full copy of the appraisal and can give you information about the comps, but I'm not sure what is relevant.
 
The houses in the area sold for $130-131/sqft and ours is at $132. We did have the builder add some extras, as you always do with new construction. We added more hardwood, gutters, fencing, a storm shelter (in OK with a nervous wife, you have to have one), and some additional paint glazing in some areas of the house. The comps had some of these features and the only thing listed differently on the appraisal is our storm shelter, where the appraiser gave us full quoted cost credit.
 
My question is what are my arguments for having the builder pay the full difference? Obviously for him this is not only about my sale, but future comps as well. I would imagine he is going to try to get me to pay some or all of the difference. It is a VA loan, so I could walk, but realistically ~1% is not enough to walk away from a home we more or less finished out to our specs.
 
I wonder what is typical. I assume the builder must come down, but that is not based on experience. I would also be open to adding a few additional items to balance it out. If he added a few additional ceiling fans and wired my wall mount and home theater I might be willing to pay more of the difference. To my mind that would allow him to keep his comp price up while giving me something for my money. Is that legal? Would we have to reappraise or tell the bank?
 
Please let me know my options and what you did or have seen done in similar situations. I have less than 24 hours to get my ducks in a row. If you need more information let me know and I will be happy to provide it.

tracylayton

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Re: VA Appraisal Low on New Build
« Reply #1 on: September 29, 2014, 06:54:20 PM »
As a  real estate broker, my experience is that the builder should come down to the appraisal price. Not saying I would walk away from the deal over $3,000 but I think 80% of the builders will realize that they will have to deal with an appraisal issue with the next buyer as well. I would hold his feet to the fire and THEN reconsider if that doesn't work. Appraisals are done for a reason...mostly to protect the lender, but also to protect the buyer. Hope this is helpful!

Booma

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Re: VA Appraisal Low on New Build
« Reply #2 on: September 29, 2014, 07:43:34 PM »
Thank you very much for the feedback. It confirms what I assumed. I only hope it is that simple and my builder acknowledges his position.

If I am forced to come down from that position do you have any experience in trading minor upgrades for consideration of the purchase price at this late stage? I would much rather barter a few niceties than fork over cash for nothing, but I don't know if that it is even appropriate to suggest.

tracylayton

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Re: VA Appraisal Low on New Build
« Reply #3 on: September 30, 2014, 07:41:40 AM »
If he is not already paying any closing costs, perhaps have him pay $3000 of your closing costs? He gets his sales price and it is a break even for you. I would try explaining that you don't want to pay more than the bank thinks it is worth. I have had very few listings that didn't appraise in the last 13 years, because I am very careful with my comps. Of the three I had, all 3 sellers came down to the appraised value. They did not want to start all over again and risk it not appraising again, when they already had a ready, able and willing buyer ready to close. If that doesn't work, maybe meet him halfway...lower the sales price by $1500. It may depend on how hot the market is in your area. if prices are rising fast enough, he may gamble on a higher appraisal but then he has "holding costs" for another 45 days once he finds a new buyer so that their loan can get processed. I think he would be silly to take that gamble. Good luck!

Booma

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Re: VA Appraisal Low on New Build
« Reply #4 on: September 30, 2014, 11:21:17 AM »
Thanks again! I just looked on their site and they have listed their model, which is the same plan, for $317,900 this week. I am not sure if models typically list at a lower price, but it further supports the idea that they misjudged the comps. I'll go in with the assumption that it is their responsibility to resolve it and see what happens.

I actually rather like the builder and his staff and they have done a fine job despite all the setbacks, so I'll listen to his options but clearly communicate that in my opinion that it is something he should resolve on his end.

Booma

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Re: VA Appraisal Low on New Build
« Reply #5 on: September 30, 2014, 07:20:33 PM »
I spoke with the builder's agent today. We are first time home buyers and they know it, so the first thing she said was I'm sorry this happened to you on your first ever home. What you'll need to do is pay the difference. She went into an explanation about how the VA appraiser had a "chip on his shoulder" and a bad attitude and undervalued the house. She said a conventional appraiser would have valued it much higher and therefore it was our responsibility to make up the difference.
 
She also tried to show some other comps, but her stance was that the comps in the neighborhood (several across the street) were only valid if they built the house. The other builders weren't up to their standards and should not be considered. She also said that we had asked for several upgrades that the VA appraiser didn't value fairly and we should be responsible for paying for our additional requests.
 
I find this all to be mildly insulting, but I sat and said little while I gathered information. I spoke with my attorney and I intend to send a polite and professional email tomorrow offering to allow them to pay the difference in closing costs so they can retain their purchase price. I'll explain that I appreciate the information they provided, but I do not find it to be correct.
 
If they get ugly I will make it clear that I can walk and will have a much easier time finding a place to buy than they will selling the house. They have three completed, unsold homes in the neighborhood (there are only about 60 homes total in the development). Adding a fourth one will hurt them more than it does me.

fxsts12

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Re: VA Appraisal Low on New Build
« Reply #6 on: October 12, 2014, 07:59:32 PM »
The builder has huge margins in the build.  Think about what they would have to give up to get someone to buy an existing house.  You have a ton of leverage so use it. It is a small amount for them.

tracylayton

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Re: VA Appraisal Low on New Build
« Reply #7 on: October 12, 2014, 09:30:49 PM »
I've been wondering how things turned out for you...did the builder come down to the appraisal price/

Cinder

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Re: VA Appraisal Low on New Build
« Reply #8 on: October 14, 2014, 07:16:17 PM »
I've been wondering how things turned out for you...did the builder come down to the appraisal price/

+1

usmarine1975

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Re: VA Appraisal Low on New Build
« Reply #9 on: October 14, 2014, 08:04:42 PM »
Your Realtor can also lower their commission if you are using one.  Also could check a conventional or FHA loan. I have not yet found the Va loan to be of value. My understanding is they are more competitive when the interest rates are higher.  Your builder is full of crap in regards to their home being worth more because they built it.  They probably use the same sub contractors the other builders do.  I was a sub and it infuriates me to this day in my 15 years rates for carpenters have stayed the same meanwhile home cost have tripled. Material hasn't risen that much.  Builders are making a boat load and still paying 1990 rates to contractors at least in my area.

Realtors have benefited as well with higher commissions for the same amount of work.  If and when I buy another home a Realtor will not be used on my side nor will I pay the buyers commission.  A lawyer can draw up the paperwork.

arebelspy

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Re: VA Appraisal Low on New Build
« Reply #10 on: October 14, 2014, 09:22:45 PM »
Often a builder won't want to lower their price because it will hurt the comps for their other builds, but they will throw in incentives (upgrades, paying all the closing costs, etc.), that will bridge the gap and not show up on the final closed price, to create a win-win.

Something to suggest if anyone else is ever in this situation.
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escolegrove

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Re: VA Appraisal Low on New Build
« Reply #11 on: October 18, 2014, 09:50:15 PM »
The other issue you can run into is that you put to many "upgrades" that don't add value to the appraisal. Unfortunately many grades don't increase with the appraisal. So if you were already pushing market and than added a bunch of extra. You can run into that trouble.