I'm buying a new construction home and the appraisal came in higher than our contract price. Builder asked us to re-sign the contract for more

Asked by Kellynking01, New York, NY Fri Dec 20, 2013

money. Is that even legal for them to ask? We told them absolutely not, but I can't believe they wanted us to pay $3k more than the contract price! The builder tried to get us to re-sign the contract and not have us tell our realtor about it. Shady, horrible builder! Has anyone heard of this happening when the house appraises for higher than the contract price?

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18
Ruth and Per…, Agent, Los Gatos, CA
Thu Jan 2, 2014
Hi Kelly

Thanks for your question and regret to hear of your problem.

It all comes down to Your Contract, and if it allows the Builder to raise the price.

Work with your Realtor to get what is Owed to you.

Good luck.

Ruth
Web Reference:  http://www.ruthandperry.com
0 votes
Bev West, Agent, Greeley, CO
Thu Jan 2, 2014
A contract is a contract. Builder should have done his homework before listing. By the time you close, values could go up again. Stick to your original contract!
0 votes
Linda Welsh, Agent, Austin, TX
Mon Dec 30, 2013
Kelly - So sorry you have found yourself in this situation. Like you, I started out in New York many years ago but through a series of moves and relocations, finally arrived in Austin 15 years ago.. This sounds like a situation where it is most likely a small builder who is (a) either trying to take advantage of you; or (b) trying to profit in another way that is less than ethical. Why he thought he could coerce you into paying more after you were already under contract for - we can only guess at. I do know that many builders look at their $ per sq ft and rarely discount their prices unless it is a closeout or a spec home that has been sitting...they want to protect that margin and set a bar on their price points. I'm glad you chose to be represented by a Realtor and he/she can help you through this situation. Very often builders will negotiate on upgrades and other details such as closing costs, buy down points on a mortgage etc....(but most often on upgrades to your home) rather than negotiate on the bottom selling price. Perhaps this was the intent on that builders' part - to try to build in some upgrades and beef up his price point since it appraised for more. No doubt you already have included the upgrades you want so there is little or no value to you in signing a contract for more than you have already contracted for.. I find it is almost always best to approach a situation like this with a professional in tow (your Realtor) and make the outward statement that you are "sure there has been a misunderstanding here" and help open that dialogue to try to uncover the intent if possible...If your builder crossed over the line, then they will at least know that you have strong representation and that you "have his number". Keep in mind that this builder will likely be responding to some punch list items during the first year that you own the home - so at least (outwardly) you can stand your ground but still use the relationship you have with that builder to get things done...I have always found that prefacing a request with "I know you will do the right thing" works wonders when dealing with situations like this and a calm but firm demeanor can accomplish a lot. Best of luck to you in your new home and I know you will love Austin.
0 votes
Susie Kay, Agent, Dallas, TX
Wed Dec 25, 2013
Absolutely consult your realtor! She/he should be your first stop for any questions.

Susie Kay, Realtor®
GRI, CHMS, SFR
Residential/Commercial/Investment
English-Indonesian-Hokkien
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United Real Estate
III Lincoln Centre, 5430 LBJ Freeway #280
Dallas, TX 78240
469-371-2899
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http://www.dfwdreamhomes.net

Servicing your real estate need is my priority!
0 votes
Stephen McCl…, Agent, Georgetown, TX
Mon Dec 23, 2013
Hi Kelly,

The reasons the builder wants you to re-sign the contract with a higher value based on the higher than anticipated appraisal is purely for their benefit- 1. They want to expand their profit margin. 2. They want to have the higher appraisal values to leverage themselves moving into the 2014 buyer season. This allows them to raise their prices in 2014 much easier as they have the history of comps to support it. THE REAL QUESTION FOR YOU TO ASK YOUR BUILDER is what is the benefit to you? They will respond that the higher value means your home will "on paper" be worth more in the market. That is like owning stock. The only value the home really has is what the market is willing to pay for the home at any given time period. So there is no real upside to you on that point. It just means you will pay more in property taxes next year. That is a reality.

The only benefit to you as one of my peers previously mentioned is that it would allow you to "roll in " extras that you may have/be paying cash for. Upgrades that were not included in the mortgage. BE CAREFUL with this. Make absolutely sure your lender will qualify you at the higher mortgage amount and ABSOLUTELY can meet the contract close date. Otherwise, you have exposure. I do not advise on this move anyway financially speaking. Why pay additional interest on upgrade items that may not truly boost your homes' value anyway. The less the mortgage, the less the interest. That is always safest.

Happy Home Ownership,

Stephen B. McClain, Broker Owner
Cornerstone New Home Solutions

512 876-3116
smcclain@cornerstonenewhomesolutions.com
0 votes
Josh Barnett, Agent, Chandler, OK
Sat Dec 21, 2013
Never heard of this one happening before, you should have asked him to sign it for 3k even less, i.e. 6k less.

Hope you close.
0 votes
Barbara Coker, Mortgage Broker Or Lender, San Antonio, TX
Sat Dec 21, 2013
The only reason I could see for raising the price is if you wanted him to add extra upgrades to your agreed-upon specs. If not, I can't see how your attorney or Realtor would advise you to do that.

Good luck!
Barbara Coker
NMLS#228545
Licensed Mortgage Loan Officer
100% Home Loans All Over Texas!
0 votes
Israel Gutie…, Home Buyer, Cedar Park, TX
Sat Dec 21, 2013
Appraisals on new construction homes almost always come in higher than contract price. That doesn't change the agreement you already have in place. Stick to your already agreed upon purchase price.
0 votes
Steven Nusin…, Agent, Austin, TX
Sat Dec 21, 2013
All I can say is WOW. I agree with most of the comments here, and to answer your question: No, I have never heard of this.
0 votes
Laura Rosales, Agent, Austin, TX
Fri Dec 20, 2013
Hi Kelly,
If you have a signed contract then there is no reason to re-sign and you are very smart to reach out and ask questions. You were also very smart to have a REALTOR represent you when purchasing the home. New home sales agents are not licensed REALTORS and some builder contracts actually state that the builder is not responsible for any statements their sales agent makes. Always ask that any requests be in writing and review all documents with your REALTOR prior to signing. Additionally - you could take a moment and educate the builder on what the appraisal is used for in most cases - it's to establish a value for the lender so that they can lend money for the purchase of the home. It is not being used to determine what you have negotiated to pay. Hang in there! A brand new home is wonderful but it does come with bumps in the road along the way!! All the best, Laura

Laura Rosales, REALTOR®
Premiere Team Real Estate
Serving clients in Central Texas
Call: (512) 771-5334
Laura@Premiereteam.com
0 votes
Jason Crouch, Agent, Austin, TX
Fri Dec 20, 2013
I'm also super-interested to know who this builder is, for multiple reasons. NO reputable builder would do either of the things you described here (namely, trying to change the price and going around your agent by not informing him/her). I've never heard of this happening, and I've been selling full-time in Austin for almost 17 years.
0 votes
Dan Tabit, Agent, Issaquah, WA
Fri Dec 20, 2013
Kelly,
First thing to do is tell your agent. That builder should be ashamed and deserves what they are going to get done to their reputation for even asking. Trying to go around your agent AND asking for a higher contract, what nerve.
Tell your agent you want to use this to your benefit. Your agent or their broker need to sit down with someone from the builder and explain what a terrible thing they attempted to do and how social media can spread bad news like wildfire. They need to do something to make this right in my opinion. Sorry this happened to you.
0 votes
Kelly,
Before you tell the world who the builder is, I see others want to know, see what you can do to work this to your favor. Once you publically shame the builder your power is gone and there is no reason for them to make this right with you.
Flag Fri Dec 20, 2013
Urvi Desai, Agent, Austin, TX
Fri Dec 20, 2013
If you guys had already signed the contract then y'all are not obligated to pay higher than whats in the signed contract once all the parties have signed it its a done deal. The builder legally cannot ask a higher price once the contracts have been signed . He can give the 3K towards your closing costs as builder concession.

Also -the3K becomes a part of your equity in the home! It should also not affect your Loan-value ratio which means the higher appraisal value cannot be counted against you when considering the 80% downpayment. The loan-value is always based on the lower value (either sales or appraise - in your case the contract price
0 votes
JOSEPH E JAR…, Agent, Austin, TX
Fri Dec 20, 2013
Don't sign anything, get your Realtor and/or their Broker involved immediately, and please let us know the name of the builder and where you are located. It says New York, New York but you asked this question in the Austin Texas area. Thanks and good luck!

Joe Jarusinsky, Realtor/Master Instructor, Keller Williams Realty, Austin's #1 Real Estate Company, Call 512-261-4415
0 votes
Dallas Texas, Agent, Dallas, TN
Fri Dec 20, 2013
Oh my ... in 1st place why would the builder have a copy of your appraisal ? Guess builder thought if he had a person crazy enough re sign an executed sales agreement $3K more in their pocket.

An executed sales agreement is an agreed price !

Lynn911 Dallas Realtor & Consultant
Multimillion Dollar Sales Producer
972-699-9111
http://www.lynn911.com 100's of Dallas homes listed for sale or lease

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0 votes
BJ Christian…, Agent, Park City, UT
Fri Dec 20, 2013
I would also like to know who the builder is as I have clients in the Austin area. Thank you.

BJ Christianson
Associate Broker
Equity Real Estate - Luxury Group
801.949.5589
bj@parkcityhighlife.com
http://www.parkcityhighlife.com
0 votes
BJ Christian…, Agent, Park City, UT
Fri Dec 20, 2013
Wow - yes, that sound incredibly shady. Get your agent involved. Make sure there is nothing in the original contract that would allow the builder to adjust the selling price in this circumstance. If the builder tries to back out of the deal, or refuses to continue unless you agree to pay more, get your lawyer involved.
0 votes
Jeffrey Schn…, Agent, Austin, TX
Fri Dec 20, 2013
Hi Kelly,

Don't do it. This is unacceptable and unethical. However, it should cause you some concern that they even asked you to consider doing this. Be wary of them in general. As for the appraisal coming in higher, that's not at all unusual. Appraisers almost always come in at or slightly above the contract price, unless the home has significant challenges in supporting value.

Wouldn't mind knowing who the builder is ;D

Jeffrey Schnabel
Realty Austin - Broker Associate
512-913-7480
JeffreySchnabel@RealtyAustin.com
0 votes
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