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Appraisers, Builders and New Home Assignments

by Administrator on Dec 14, 2015 Homes 462 Views

For builders an appraisal is just another hurdle that must be surmounted to reach their sales goals.  Builders look at their properties as products.  They know their costs and they have targeted prices that will provide them an acceptable return on their investment.  Thus a builder approaches value based on an entirely different model than does an appraiser.

Due to the nature of their business new home builders generally want to see their appraisals as high as possible, and they pay strict attention to past comparable sales and they reasonably use past sales as a basis for building higher prices.  Builders can keep sales prices increasing in a subdivision by providing buyers with closing concessions, free appliances and by offering large commissions that often find their way back through brokers as partial credits to buyers.

New home builders managed to move new home prices in Las Vegas to a price 30% to 50% higher than the price of used homes on a per square foot basis.  It's an amazing accomplishment considering the fact that many new homes have only a nominal landscaping package and given the fact that lot sizes are decreasing.

New homes are usually priced based on a standard builder package called the "base price."  So a small, low end home with an asking price of around $ 200,000 usually provides basic carpeting, vinyl flooring and a relatively undesirable lot within the subdivision in the Las Vegas, Nevada area.  A premium lot, a ceramic tile or laminate flooring upgrade, better appliances, granite counters or many other "builder upgrades" can add many thousands of dollars to the base price of a new home.

The most difficult time for builders is during the period when the prices of the homes in a new subdivision are being established.  If market acceptance of the asking prices of the new homes is slow or non-existent, builders will have to adjust them by offering reduced “base” prices, by offering exceptional discounts and / or by offering extras to motivate buyers. 

Appraisers of new homes thus either have it easy collecting comparable sales data because a number of similar homes have been sold and data is readily available for analysis, or appraisers have a challenge when a development is new because there have been few or no sales.  It’s not hard to imagine which scenario is the best.  Having little or no data makes the entire appraisal process painful.   

Builders are quick to challenge an appraisal report that misses one or more sales in a new home development especially when the sale or sales would bolster a value opinion.  Appraisers who rely only on MLS data or data from the local Assessor's office may find that they missed the fact that the builder has one to several pending sales with non-refundable hard money deposits.  It's rare to find a deal that a new home builder cannot support and appraisers must review available builder sales data or suffer the consequences.

Working on new home appraisals is not for everyone, appraisers who accept these assignments must recognize that they need to have all of the data available from; the MLS, the Assessor and the builder.  You are not, in my opinion, an expert on the new home development unless you know about all of the recent sales and pending sales activity.

When you get to high-end homes the amenities can often get to be more and more difficult to quantify.  Builders put large premiums on lots with views, lots with golf course frontage and oversized lots with little development adjoining them and I have seen times when there is only an argument made by a builder that the differences were made based on anticipated demand.  It may be that an additional $ 100,000 is reasonable for a spectacular view in the mind of a builder, but if there is no way to support the difference in the market then appraisers cannot just add the suggested increase.

Appraisers are stuck with being the party who keeps a new home sale within a reasonable range while new home builders work to move prices ever upward.  There is a preference for new homes and buyers are often willing to pay significantly more per square foot for new versus used.  There are probably limits to how much more buyers are willing to pay but I haven’t seen any studies on that. 

For more appraisal information contact Glenn J. Rigdon MA, MRICS, ASA is a Las Vegas / Henderson Nevada based appraiser who can be contacted via email or via his business website known as Appraiser Las Vegas  (, or you can also click on “Contact Us” on the home page of this website or visit my public profile at LinkedIn at

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