How can I get a second opinion on a sales price for a new construction home?I have recently purchased a

Asked by buyer, 98021 Thu Apr 17, 2008

new
home with the help of an agent who advised not to negotiate the asking price as it's not common for new constructions. Unfortunately, I trusted the agent and later I found that other buyers got better deals from the builder. I haven't closed the deal yet but was wondering if there's anyway I can get a true and honest opinion of how much does the property actually worth. Shall I hire an appraisal or a realtor to give me a second opinion on the sales price?

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17
James Hsu, Agent, Bothell, WA
Thu Apr 17, 2008
What everyone has said so far does hold true. However, your second sentence in your question is what I have grave concerns with. "...agent who advised not to negotiate the asking price as it's not common for new constructions." I live and work in Bothell and that is absolutely garbage. Actually, it doesn't matter where I live and work...that statement from your agent is still total garbage! I have sold many new constructions and the ability to negotiate with the builder is a function of market conditions. 2 or 3 years ago when things were hot, the builder wouldn't bother to look at your offer if it wasn't full price because chances were, another buyer would come in really soon with a full price offer. However, this is 2008!!! ...the Bothell market is INUNDATED with new construction inventory and builders reallllly need to sell. This is the PERFECT market to wheel and deal and for your agent to advise you not to because it's not common practice was BAD advice. Rather than have your best interests at hand, they gave you advice that made their job easier and helped the builder out...and not helping you...their client...out. Regardless of what other people paid in the same development, this agent clearly either doesn't know what they are talking about or they're not really working for you. ...are they by chance the site agent?

Now... before you go and chew anybody out over this ... make sure your are comparing apples to apples when you compare your sale price to others...and that's where the other people's posts come into play. Is your place more upgraded than others? Better lot? etc. If not... make sure your data is accurate about what others paid for their house. ...if the house has already closed and you're basing it on public records ...then okay..you got a legitimate beef.

What contingencies do you have in place in your contract? If you find that you did severely overpay, you can see if you can get out based on one of your contingencies. Not sure how willing a builder would be in this market, but many builders would rather let a buyer go with no penalty if the buyer really wants out. This is when you need your agent to be at their best to talk their way out of the deal with no penalties. Don't know if your agent can do that based on the advice they gave you prior to writing the deal. Won't hurt trying though.

As for getting a true and honest opinion on price, if you tell us the specifics of what you bought and where, someone can probably look up all the past sales in the development and surrounding areas to give you a better idea. If you don't feel like posting that publicly, email me with the specifics and I'll see what I can find. Appraiser can do the trick as well, but that will cost you a few hundred bucks....
2 votes
James Hsu, Agent, Bothell, WA
Mon Apr 21, 2008
1. there's nothing legal or illegal about you going to ask your potential future neighbors about their purchase. It's up to those folks whether or not they want to tell you. ...that ...nobody can predict.
2. appraisers by nature have to be unbiased as possible. ... ask a few lenders to recommend an appraiser and call them up ... an appraisal usually runs about $450 ... so if you want to just get an idea of what prices have been doing around you ..feel free to contact me through my profile here.
3. who told you new construction was not more than 1%? whomever you are getting this advice from... STOP listening to them. There is no standard new construction commission for buyer's agents ...right now in Bothell with the glut of inventory ...many new construction developments are offering 3% to buyer's agents...some are offering 4% ...some are offering a split commission which ends up usually right around 2%. email me for more details.
Web Reference:  http://www.nwupdate.com
1 vote
Don Dutton, Agent, Puyallup, WA
Fri Apr 18, 2008
Another Realtor should not get involved and interfere in the contract you've made with the builder. That would be unethical and possibly unlawful. An appraiser will have a difficult time determining if you got a fair deal since builders typically offer incentives rather than price reductions to buyers. Incentives are not recorded in the public record and rarely listed in the MLS. Your best bet would be to speak to some of the current homeowners who've just closed on their homes. You could also go to the site sales office and inquire about special incentives the builder is currently offering. The agent will probably tell you or give you a current advertising flyer on the project. Keep in mind that when markets fluctuate builders have every right to adjust what they are offering.
1 vote
Rick Moore, Agent, Kirkland, WA
Fri Apr 18, 2008
If you are financing the loan for the purchase your lender should be hiring an appraiser to ensure the value is there. Ask your lender for a copy of that appraisal. You could also contact a few local realtors and ask them to do a comparative market analysis for you on the home. Compare the appraisal and the 2 or 3 reports you receive to find out if you have paid too much.

You may also want to speak with other new home owners there to find out what they really paid or what incentives they recieved. Be sure to take all aspects of the compared homes into consideration. Home size, lot size and location, number of beds, baths, garages and interior amenities. Not all homes are created equal.

Unfortunately if you have passed the deadlines for all of your contingencies there would be no way to back out of the transaction without losing your earnest money. In regards to the agent who said not to negotiate the price that is definitely a mistake. You can always try to negotiate the price especially with new construction and even more so in the current market. It doesn't mean you will get what you ask for but you never know unless you ask. Along those same lines you should go to the builder and discuss the price/incentive differences with him. He may not move since you are locked in but it may be more important to him to have a happy buyer and may meet you half way.
Web Reference:  http://www.rickmoore.com
1 vote
David - Appr…, , Maricopa, AZ
Fri Apr 18, 2008
The best way to get a true second opinion on the actual value is to contact an appraiser yourself for an appraisal. The agent who advised not to negotiate most likely is receiving a bonus, in addition to commission, for having the property sell for the full selling price (which is common but never mentioned). New construction can be and should be negotiated as the vast majority are overpriced in todays market. The advice NOT to negotiate is wrong. IT IS COMMON to negotiate with the builder and should have raised a red flag.

Having your own appraiser value the property for the market area will provide a better unbiased purchase price since the appraiser would not have a vested interest in the transaction as do agents and the builders appraiser and builders in-house lender. The builder(s) do have their own appraiser(s) that will value a new construction more in line with what the builder wants to sell it for, not necessarily for the actual fair market value. As an appraiser myself I see it happen all the time with new construction.

Yes your lender will order an appraisal AFTER a purchase contract has been signed, however, they may choose to use the appraisal you acquire prior to the contract agreement. Even if they don't, the cost of two appraisals (yours and the lenders) is well worth the expense to save a few or several thousand dollars on the purchase price and prevent you from being in an upside down mortgage from day one.
1 vote
Tman, , 30642
Fri Apr 18, 2008
Good morning Buyer,

I know nothing about Bothell, I thought it was something you get between your toes ;^) .. but construction is construction, I know, I've built and sold a bunch of it.

That said, I would agree with James Hsu on this one, he's dead on the money ...

In this market builders are just like any car dealer with a large inventory .. they want it sold because it's killing their floorplan (the cost to keep it)..

It's costing them "X" amount of dollars per day and that cuts into their profit ... and after awhile, not is it no longer profitable - it's now cutting into the profit of the last 10 houses -- it's just dollar cost averaging ...

Do your homework, be patient, be dead accurate, know and understand that area .. James makes a lot of sense here, you might follow it ..


Good luck and happy hunting.!

: ^)
1 vote
Stacey Lange, Agent, Kirkland, WA
Mon May 26, 2008
Having spent the majority of my career in New Construction, I can tell you it depends on the builder you are working with. If it is a larger builder you might be surprised to learn that sometimes they will offer a lower price to you if the price drops, or if they begin to offer a NEW incentive (i.e. $20K price drop) before your home has closed. To re-negotiate the price, well in my opinion it most likely won't happen.

But I can tell you this, Customer Satisfaction is a huge driving factor for a number of large builders - they want you to be happy in their home and with your home-buying experience. They want you to refer them to your friends and family and potentially have you buy another home from them down the road. So keep your eyes open for incentives they may be offering - maybe you will find a loophole to some savings, all the while keeping in mind you did agree to pay a certain price for that home.

Best of luck to you!
0 votes
Ardell Della…, Agent, Kirkland, WA
Sun May 11, 2008
It only takes a few minutes to print out all of the commission amounts offered on new construction. But if you are already in contract, what other builders may be offering is not as relevant as how much this one is offering.

Often a builder will offer more and be more flexible from October 1 through December 31 than at this time of year. So it may be true that today the builder is not as flexible as he was back in the Fall and Winter. Often there are seasonal disounts.
0 votes
Carrie Haymo…, Agent, Seattle, WA
Mon Apr 28, 2008
Talk to your agent and the Broker managing the office explain your concerns they are representing you and your interest.
0 votes
CATRINA ROSS, , Auburn, WA
Fri Apr 25, 2008
It's common today to place lower offers than full price. Some builders will not accept offers under their asking price, but will accept incentives instead (buyer bonus, paid closing costs, upgrade credits etc). In today's market with higher New Construction Inventory, it's getting more and more common for builders to accept a lower offer. You can ask your Real Estate agent to complete a Market Analysis showing Sold comps to your property. However, if you asked for incentives or for paid closing costs ex. instead of a reduction of the purchase price, you may still have saved more than some recently sold homes that paid less than you. It's hard to compare without knowing all the facts. Also ask your Agent to research any prior price reductions. Your purchase price might still be lower than some homes sold at an earlier stage.
Preferably a Market Analysis should be completed by a Buyer's Agent prior to placing the offer, and you would have felt more comfortable about your offer.
0 votes
Todd M. Bitts, , Freeland, WA
Wed Apr 23, 2008
I would be careful, too. Not to muddy the water, of course, but if you're going to talk to the neighbors be as sure as you can that they are being honest. Buyers love to brag about their success in purchasing a home and may very well inflate the incentives that were provided. And, as mentioned earlier, the incentives won't be found on any public record at the County. As for commissions? Every builder I've ever worked with would typically pay a "market rate" commission of 3% to the buyer's agent in order to remain competitive in the marketplace. Any negotiation(s) might be done with the listing agent, if there are multiple homes in the project, etc. Saying that, commissions are always negotiable. Because that's between the seller and the listing agent, that information would typically not be available.
Web Reference:  http://www.toddbitts.com
0 votes
buyer, Home Buyer, 98021
Sun Apr 20, 2008
Thank you very much for your feedback. I greatly appreciate all your responses. I have further questions based on your suggestions to help me in my next move
1. Is it legal to talk to the other homebuyers about the details of their deals, what would be the appropriate way to approach them?
2. How would I find an honest appraiser who would work for my benefit? I know that the lender will get one, however, it's the builder's preferred lender so there will be a conflict of interest if I use theirs.
3. For those of you who are familiar with Bothell area, what's the typical comission/bonus that builders provide to the buyers agent. I was told that builders offer buyers agents not more than 1% of the sales price for comission but for resales, the commission is usually 3%. It didn't make sense to me so I want to ask you since you are the experts. Is there a way I can get a detailed listing where the commission's percentages are shown clearly?.

Thanks again for all your help
0 votes
Cathy Sloan, Agent, Jacksonville, FL
Fri Apr 18, 2008
Currently there are very few market areas where sales are still strong. Although my market is North Florida our market is not suffering as badly as Central and South Fl. I can assure you that we negotiate price with Builders. Many times the site agents will call after I have brought a client offering to reduce the sales price, add free upgrades etc. When that fails they start offeing agent bonuses. Some Builders will not negotiate because they have just had a large price reduction.

The home you purchased may have already had a great reduction in price. If there were a recent reduction just piror to your offer, your agent may have been correct. If the other homes went under contract after yours, the market may have changed, gotten slower. Another factor is lot location. Homes with bad lot placement, small back yards, no backyard etc will require greater price reductions for the builder to sell. Sometimes there are certain floor-plans that are less expessive to build and the builder will accept a lower bid.

I would talk with your agent about your concerns and ask her to research. If the builder has been offering your home for less, She may be able to get some upgrades or a concession from the builder especially if they think you might rethink the sale, and walk awya since others have gotten discounts. I would ask the builder to buy down your interest rate. That should be worth up to 3% of the purchase price. I hope they are paying all your closing cost.

Your lender will requie an appraisal. The home will have to apprasie at the price of your contract. Builders are seeing a lot of buyers walk away from sales.
Web Reference:  http://www.cathysloan.com
0 votes
Darci Piel, Agent, Lumberton, TX
Fri Apr 18, 2008
A realtor would be giving you their professional advice and opinion; as well as possibly a comparison of the properties.Appraisars specialize in this one area. When it comes to lenders, they rely on appraisals. It all boils down to what level of information you are satisfied with.
0 votes
Jennifer Jon…, Agent, Pelham, AL
Thu Apr 17, 2008
I am sorry to hear this. Was the Realtor you were using acting as a Buyer's Agent/representative for you? Did you sign an agreement to work exclusively witht his Realtor? Obviously where I am going here with these questions, is was the Realtor representing you or the builder? To be more specific about the situation as it now stands, I would definitely pay to have an appraisal of the property be made prior to closing. If you are securing a loan, undoubtedly your lender will be ordering an appraisal, so check with your lender first before ordering an appraisal on your own.
Jennifer Jones
Associate Broker
Coldwell Banker SSK Realtors
Warner Robins, GA 31088
jennysellshomes@yahoo.com
0 votes
Lara McHenry, Agent, Spokane, WA
Thu Apr 17, 2008
Here is another consideration:
Sometimes it is also hard to know the particulars of what kind of "deal" the builder gave a purchaser. Many times upgrades are negotiated, or even in some cases, buyers ask for downgrades in order to get the home at a lower price. For example...maybe instead of a stainless steel appliance package they downgraded to a lower priced option, or no landscaping, less expensive counters, floors, etc. It happens a great deal more than we realize and ala carte pricing is a great way for the builder to get homes sold at a lower price according to the median price points of an area and the upgrades can be added according to what a buyer can afford or wishes to purchase. Alot of do it yourself types do not mind the minimalistic approach as they purchase the upgrades and do it themselves when it is manageable for them...usually around tax rebate time!!! (kidding of course)
I would honestly state that I am not seeing alot of price negotiation on new construction with the builders right now and that is largely due to many economic factors. Also another factor may be with the structure of the construction loan the builder used to buy the lot, and build the home...many have their hands tied with pricing at this point as they are sitting on their inventory much longer and typically the loans are on an ARM options, or many other non conventional possibilities...which then continues to escalate and costs the builder more money every time the rates fluctuate or if they refinance.
I think it would be wise to speak with your agent openly about your concerns and it is legitimate to want to get the best price you can, see if the builder was offering any incentives during previous purchases. I saw a great deal of short time new construction promos being advertised by builders at the first of the year in hopes of gaining a foothold on the market and salvaging some of their revenues. This may be a similar situation...however if you don't ask...you can only speculate.
Best of luck.
0 votes
Courtney Coo…, Agent, Seattle, WA
Thu Apr 17, 2008
HI - That is a tough one -you should be able to figure it out on your own by looking at the other sales prices for the ones that sold recently. Even if other buyers got better deals, you need to look at the specific perks of each lot. So many times there are specific lots that are priced differently for a huge variety of reasons. There also could have been a special at the time other buyers purchased. Builders tend to run specials here and there and they do change depending on which houses the builder is wanting to push.
In the past, I sold a new construction house to my client only to have the builder run a promotion not more than a week later. I called the site agent for my client and simply asked for the same deal. The builder agreed. It is in their best interest to make you happy - you are a buyer in a market where the buyer pool has grown smaller.
Just ask your Realtor to help you - Good luck!
0 votes
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