Home Buying in Arvada>Question Details

Stevens123, Home Buyer in Arvada, CO

I am having a home built. They offered an upgrade incentive w/the purchase. Can the appraisal include the incentives built into the purchase price?

Asked by Stevens123, Arvada, CO Thu Oct 6, 2011

Basically I was wondering if we can have the appraisal of the house shoot for the builder incentive upgrades our out of pocket upgrades base price of the house. If the builder didn't offer the incentives, those upgrades would have been out of pocket and we would have asked to have the price of the home appraised to that value. We are not obligated to go with the builders lender and can choose our preferred lender. Thanks for the help.

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The purpose of the appraisal is to give the lender the documentation that they need to justify the value of the collateral supporting your loan. In that respect, it doesn't matter who pays for upgrades. If the house is built with upgrades, the builder should make the appraiser aware of those upgrades, whether the builder provides them as an incentive or you pay for them out of pocket.

The builder should be at least as concerned as you are with a good appraisal. If your new home does not appraise, the lender may not give you the loan you need and the builder risks losing the sale. In addition to that, your home becomes the next best comparable for similar homes built in the neighborhood. As a result, if your home sells for less, it will affect the value for the next several homes built by the builder in your community.

Good luck!
0 votes Thank Flag Link Thu Oct 6, 2011

The appraiser should be aware of the upgrades and appraise the home accordingly. In my experience, most appraisers look at the contract price and do their appraisal around that price. The fact is, you will get an appraisal showing your home is worth what you paid for it. It really is not a real concern right now as to how much over that the appraisal comes in at. Since the appraisal problems and sanctions of recent years, I rarely see an appraisal come in for much more than asking price. It will be interesting to see what value your home is appraised at with the incentives built in. You can let us know if you don't mind. We like to monitor those things.

Robert McGuire ASR
Your Castle Real Estate
Direct - 303-669-1246
0 votes Thank Flag Link Sat Jan 26, 2013
The upgrades are kept track of and accounted for in the appraisal. Alot of times here in Colorado the builders ask the new home owner to pay a portion (25%) of the upgrade as the home is being built and credit is given at time of closing.

If you are allowed to use your lender of choice here in Colorado I would be happy to prepare a quote for you. Just let me know.
0 votes Thank Flag Link Thu Oct 6, 2011
Excellent question. I've heard horror stories lately of new houses not appraising for the purchase price (because of the extensive upgrades). Make sure the builder's contract specifies what happens if the house doesn't appraise. Will they reduce the purchase price to the appraised price? Or do you have to come up with the difference? Can you back out of the contract? This is why I recommend that all buyers -- even new construction buyers -- use a REALTOR as a Buyer's Agent. You need someone looking out for your best interests! Good luck!
0 votes Thank Flag Link Thu Oct 6, 2011
If you are getting a mortgage they have to appraise the house as it is contracted to bebuilt, if the upgrades are included, it has to include them, if they are not included thn they are not factored in.

Nothing is ever really free, usually the costs for upgrades are already built in. Builders do not like to lower their price, but will include more things instead... you should compare the builders lender's interest rate and costs with your own and choose the best one.
Web Reference: http://www.ScottSellsNH.com
0 votes Thank Flag Link Thu Oct 6, 2011
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