Want to know how appraisers value new construction homes in the Philadelphia area?
This post is all about the appraisal process of new construction homes.
Appraising new construction homes is a specialty of it’s own kind and we must be extremely mindful of the differences between new houses and existing homes when determining market value.
You are going to learn about:
- New construction home sale prices – past and current
- Number of new homes for sale now
- The questions we ask builders
- How we determine value
- What happens when the new house is finally finished
After you learn about we look for as appraisers, you are going to be extra prepared when shopping for a new construction house.
This post is all about the appraisal process of new construction homes.
New Construction Homes: Current Market Stats
The demand for Philadelphia area new construction homes has dropped significantly over the last few months.
Finally, some good news for the home buyers!
Below we can see the number of new construction homes that have sold over the last two years. We are currently at the lowest point in that timeframe.
You will also see the median sale prices are declining.
So don’t be shy about asking the builder for incentives or discounts on upgrades.
The number of new construction homes for sale in the Philadelphia area is basically a third of what is was two years ago.
So, be prepared for limited choices.
Currently, there are only 559 detached single family new construction homes available for sale on the multiple listings in Philadelphia and suburbs.
But, fortunately, not all builders will advertise all of their new homes in the mls.
Which means there is a chance there may be more new houses to choose from than what is reported below.
You could ask a realtor to help you find new construction homes outside of the mls. If you don’t know a realtor then I am happy to refer you to someone that I know, like and trust or you could try searching Homes.com
If you’re looking for an attached new construction home then, it looks like you have a few more choices.
Currently, the multiple listings report 650 new houses in the Philadelphia area for sale.
After you choose your new home.
Now that you have put a deposit on your new construction home the lender of your choice will hire an appraiser to estimate the value of the home as if were already complete.
Sometimes your new house is already complete and ready for a quick delivery.
In most situations the house has not been built yet.
Either way, the lender will want an appraisal of the house to determine the estimated market value.
Usually, we are requested to complete this appraisal within a month of your agreement of sale.
But, I have completed house appraisals where I can see the contract was signed a year ago.
So, the timing of the appraisal request all depends on the lender and the agreement that you have with the builder.
The gazillion things appraisers must consider when estimating the value of your new house.
Ok, I realize gazillion is a bit of an exaggeration but it sure seems like a gazillion!
So, the first step I take is to turn to my friend Google.
I research the builder to see what new houses or communities this builder has constructed in the Philadelphia and suburbs area.
If the house that I am appraising is located within a new development then I will gather all of the information regarding that particular housing development and look for similar developments in the market area.
Then, I have a conversation with the builder (or the builder’s agent) so that I can confirm what I have found so far.
This is where the multitude of questions begin. And most agents or builders are happy to provide the answers.
But, not all agents are thrilled with the process so we must remain patient and friendly but very persistent.
Fortunately, most agents I have met are extremely helpful, organized and thoroughly prepared for the appraiser.
Questions that I ask when appraising a new construction home in a new development.
Below are some of the questions and the basic information we must gather when appraising new construction homes.
It’s not an all inclusive list.
To keep it simple I won’t dive into specific circumstances such as condominiums, 55+ communities, green homes, etc
This list is just the beginning basics for Philadelphia area new construction homes:
What is the:
- Development Name
- Model Name
- Base Price
- Lot Premium
- Upgrades (specifically)
- Estimated Taxes (quite often I will figure this out myself)
- Lot size
- Total # of houses in the development when complete
- Are all of the houses the same?
- How many have settled
- How many are pending sale
- Common area – what and where
- Total # Phases
- Subject’s Phase #
- Is there a Homeowner’s Association – if so, who is in control and what is their phone # and email
- HOA fees: how much, what for
- List of standard features
- Floor plan
- Detailed info regarding recent sales and pending sales in the development
- Detailed info regarding recent sales and pending sales in a different development by the same builder that is similar to this development
- What other developments are your potential Buyers considering that are offered for sale by a different builder?
Whew! That’s just for starters!
Agreement of sale for new construction homes.
The agreement of sale for most of the new construction homes that we appraise are 50+ pages long.
We must analyze this agreement and confirm that we have been given the most recent contract since it’s not unusual for the new construction home contract to be changed many times.
Many of our answers can be found in the contract, but our research involves confirming the information that has been provided to us.
RELATED POST: In the Report – What You Should Expect to See
Finding comparable sales for new construction homes to determine an opinion of value.
Not all sales are comparable.
We are looking for New Construction Homes. Zero years old.
First, I go back to the list of information that we have gathered and look at the last two questions.
I start with the homes in the development.
Then, I look at the homes in another development by the same builder.
Finally, I look at the homes in a different development by a competing builder.
In a perfect world, I would find a comparable sale in each of those 3 places.
But, appraising is rarely that easy haha.
And, it often requires a lot of research to find the best solution.
Here’s what I am looking for:
- Recent sales
- Similar location: same township, school district, or county or competing location. The closer the better. We cannot ignore a comparable sale that is located close by to use something far away instead!
- A view that is similar: houses, commercial, lake?
- Quality of construction and upgrades that are the same or similar
- Lot size that would be considered similar
- Style and size of the house, number of bedrooms and baths that would be considered to be a reasonable substitute by the typical buyer
- Extras: Finished basement, Garage, Fireplace, Porch, Deck, Etc – it would be nice to find sales with similar extras
Here’s what I am NOT looking for:
- A sale price
As home appraisers, we are not appraising the contract price.
We are appraising a new construction house based upon comparable sales, cost to build and/or rental income.
Whether a house is comparable or not has nothing to do with the sale price.
Comparable sales are chosen based upon the physical attributes of the house, the land upon which the house is situated, the external influences (view, highway noise, etc) and the circumstances of the sale between the seller and buyer.
By circumstances I mean: Was there any duress or urgency? Is there a personal connection? Etc. If so, then the sale may be deemed not comparable.
Your new construction home is finally finished! Now what?
Before you can move in and throw the house warming party the lender will ask the appraiser to go back to the house to make sure it’s 100% complete.
This is where the panic sets in for many home buyers.
Because the hoops to jump through seem so easy yet, they can also be very frustrating.
Usually, we will receive a request for a final inspection at the very last minute.
Totally normal because the new house is finally complete and everyone wants to settle immediately.
Here’s what happens 9 times out of 10:
- I will call the realtor/builder/project manager and ask “Is the house ready for a final inspection?”
- Answer is either “YES!” or “Not yet, but it will be.”
- Either way, I will say something like: “100% complete means that everything is installed and functional as promised in the agreement of sale – that means everything – You are sure we are good? Before we set the appointment, would you like to go over to the property first to be sure?”
- They promise all is good and set the appointment.
- I arrive to discover the new house is not 100% complete.
- Settlement is postponed.
- I have to go back a second time once the house is actually 100% complete.
This situation could be easily avoided and would be much less stressful for the new homeowners if their new house was actually 100% complete the first time around.
Here are some examples of brand new houses that were not 100% complete when I went out for the final inspection:
- No driveway.
- Deck halfway finished.
- Light fixtures not installed.
- Missing shower enclosures and missing shower doors.
- Kitchen cabinets and appliances sitting in the middle of the kitchen floor.
- Central air conditioner unit looked like it fell off a truck and rolled down the street before it was installed.
- My very favorite: the main water supply to the entire development was not hooked up yet.
Hope you found this helpful!
This post is all about the appraisal process of new construction homes.
