Lastly, with so many nearly new homes on the market, and in short sale or pre-foreclosure, and builders so hungry, you should have no problem getting a dream home without builder nightmares.
You also need to have Realtor look at recent sales and compare sold prices/DOM with/without the options. You may be investing poorly in some options, while others offer a good ROI. I sell a lot of properties in the city zips and I know which options I encourage my builders to include and which are just icing and never help sell the cake. 410-258-8935 if I can be of further assistance.
It is my opinion that you should never pay more for a house than it is worth, especially in this declining market. An appraisal is an appraisal, FHA or otherwise, it should be the same. If the house doesn't appraise, they should be willing to sell you the house for the appraised value. You should not give the builder any money outside of closing. You need to look over your contract carefully and see if there are any contigencies for the appraisal. If there is, it should tell you what your options are if the house doesn't appraise. You will also want to read the contract carefully or seek legal advice if you decide to walk away. You want to make sure you are able to get back your deposit.
First and foremost, as a Terp Alum and current Grad Student, let me say Go Terps!
Now that I got that out of the way, the real simple answer here is you should really have an agent representing your interests. The builder's sales people are there as a representative for the builder and they only have their's and the builder's best interests in mind. At the very least, it sounds like you are not getting the best advice.
A couple initial questions you may want to ask the sales rep are:
1. What happens if the home doesn't appraise?
2. Ellaborate more on giving the builder an additional 10%.
How they answer those two questions will be very telling. You shouldn't have to sacrifice what you want in a home just for the fear of it not appraising. In my opinion, if it doesn't appraise that means the base price is set too high to begin with and it is the builder that needs to make the adjustment - not you.
If you have any additional questions, please do not hesitate contacting me.
Best of luck in your pursuit of your home!
Ricker Realty Inc.
Please contact me at LDevnew@cbmove.com so that I can try to help further. You need representation whenever you deal with a builder because of situations just like this!
What does your contract say happens if it doesn't appraise? Do you have a Realtor working with you? They should be able to help.
I would think "walking away" you would lose your 20k deposit. Again; refer to your contract.