Home Buying in Fremont>Question Details

Newtomarket, Home Owner in Fremont, CA

For new homes do people generally keep appraisal contingency? If not - what if it does not appriase? The homebuidler seemed defendsive when mentioned

Asked by Newtomarket, Fremont, CA Mon Mar 21, 2011

The property in concern is a bmr which is sold as regular sale since they could not find any one. New home. Similar bigger homes had price/sq ft around 427. This is smaller with price/sq ft of 510. The remaining smaller homes are *all* bmr. There is no house similar to this so I am worried what if it does not appraise. The homebuilder did not seem to agree for appraisal and said, their financer thinks it will appraise

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New -

Key phrase is - builder's fiancer thinks it will appraise.
Well of course they do.
If you are concerned, may be worth ordering your own outside appraisal. $500 or so worth of peace of mind.

Web Reference: http://www.TalkToCJ.com
1 vote Thank Flag Link Mon Mar 21, 2011
NO lender will ever allow a buyer over pay ANY home. Builder are start realize they can't build a home which would never appraise.

Have your buyers agent resolve all your issues

Lynn911 Dallas Realtor & Consultant, Loan Officer, Credit Repair Advisor
The Michael Group - Dallas Business Journal Top Ranked Realtors
1 vote Thank Flag Link Mon Mar 21, 2011
A huge "RED" flag should go up when dealing with new construction AND financing through the builder. Of course their financer will believe it will appraise.....but this isn't the cleanest of relationships.

Our recommendation is to make sure an "appraisal" clause exists in the agreement that will allow you to exit the agreement should the property not appraise, and that it be done by an independent appraisal concern....not the lenders or builders.

Remember....the last thing you want is to purcahse a home that is really worth less than your purchase price. Take measures to pritect yourself.

Good luck,

1 vote Thank Flag Link Mon Mar 21, 2011
Yes, there is appraisal contingency on new homes. Insist on it, whether you are buying a new/ or an existing home. Especially in a market we have right now, it will safeguard you. If they believe the value will come in, then why aren't they accepting the appraisal contingency?
1 vote Thank Flag Link Mon Mar 21, 2011
Hi Newtomarket,

If the home does not appraise then you will have several options:

1.) Renegotiate the selling price with the Builder(Seller).
2.) Cancel the escrow, get your deposit back and move on to find a new home.

I would imagine the Builder would agree to option one, lowering their price, if the homes value comes in low. It would make no sense for them to refuse since any future Buyer is going to ask for an appraisal as well and the issue with value will come up again. This will only end up costing the Builder more money in the long run. I do not see your Lender allowing you to come in with the difference yourself, nor would I recommend that you even consider this as an option. I suggest that you be patient and wait for the appraisal to be completed. In the meantime, speak with your Realtor and discuss what your next plan of action should be. Good luck!

1 vote Thank Flag Link Mon Mar 21, 2011
Typically, you will have 17 days to remove contingencies, including appraisal contingency. You don't want to remove this until the appraisal has been completed and is appraised to the purchase price. If not, this becomes a problem especially with your lender. Or for cash buyers, they have the chance to assess their position. I would keep the appraisal contingency regardless of new or existing homes
1 vote Thank Flag Link Mon Mar 21, 2011
well normally there is a contingency clauses in purchase agreements that state something to the effect of the buyer receiving financing. if you aren't able to get financing because of the appraisal then the deal is not there but you will need to check your agreement. however if you don't close you can possibly lose your earnest money deposit.
0 votes Thank Flag Link Tue Mar 22, 2011
Should I appraise using 3rd party, or the preferred financers appraisal is good enough ?
0 votes Thank Flag Link Tue Mar 22, 2011
A lot depends on your personal preference, strength and commitment to this property. If you really want it as a possible "Live In" don't let all this jibberish stand in your way. Just pull the trigger if it's close to a good dea for you. Otherwise I'd say.......NEXT!! Give us a call if we can help. We're multi-linguel.
0 votes Thank Flag Link Mon Mar 21, 2011
Hello Newtomarket,

The previous answers are all very good. If you are buying the home and being represented by a Realtor when writing the contract , if it is a standard CAR Residential Purchase Agreement, have them check the box under Paragraph 'H' Loan Terms, (3) ii "the loan contingency shall remain in effect until the designated loans are funded". This will give you increased security to wihdraw from the contract if there is an issue with the loan or appraisal.

If you are buying the home using the builder's own contract, which is pretty common with larger builders, then I would definitely have a clause written in to the contract that the purchase is 'subject to the home being appraised at the contract price of higher', or words to that affect.

Kevin Dibben,
DRE 00692670
0 votes Thank Flag Link Mon Mar 21, 2011
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