Expert: liznarr - 8/22/2009

Question
I live in South Carolina. It seems that the price of new homes continues to rise per square foot. How can the average person be sure that they are not over-paying for a new or used home. We prefer new if we can afford. I am speaking of the $100-$150,000 range.
Thank you.

Answer
Hi Barry,

I apologize for the delay in answering.  My daughter had surgery earlier today due to an accident, and most of my time for the previous couple days has been spent with her.

Your best protection to ensure you are not overpaying for a home is an appraisal.  If you are financing with a lender, they will always require an appraisal to make sure the price is not inflated, thereby protecting their investment, and also yours.

A good sales agent will always pull comparable sales for you BEFORE you make an offer so that your offer will be in line with market values.  If your agent does not volunteer this, ask that you be provided with recent comps.

I have found that most builders will not budge too much on pricing of new homes, but will offer concessions such as upgrades instead, at no additional cost to a homeowner.  This is because they try to keep the values of their homes in a higher range.

I recently had an instance where a purchaser had a new construction home (in a new subdivision) under contract.  Due to slow sales, the builder/developer significantly dropped the list price of all his other new homes in this subdivision to prices WELL below a similar home of his that my purchaser had now contracted to purchase.  

The builder offered my purchaser a small reduction in pricing when confronted about the situation.  I advised my Purchaser to push for a much larger reduction, more in line with the builder’s recent reductions on similar homes.  The builder initially balked, but ultimately caved-in.  Our argument to the builder was that he should expect a problem with the appraisal, since pricing on his comparable/similar homes offered for sale had been dropped to a price well below what my purchaser’s contract price was.  

We let the builder know the lender would be made aware of the situation.  Had my buyer’s home under contract not appraised for the full sales price by the lender, the purchaser would not have been required to complete the transaction, due to the financing clause within the Contract of Sale; all earnest money would have had to be refunded; and the builder could have lost a sale.  

My point in explaining the above is… if you sign a contract of sale on a home under construction, be sure to stay up-to-date on any significant price drops a builder might make so that you can ask for reductions to keep your pricing in line.

I hope the above is helpful to you.  Again, sorry for the delay.  I work the greater Columbia, SC, market.  If you are looking in this area and will send me your personal email address, I can help by searching comps for you.

Good luck to you, and feel free to write again if you have additional questions.

Regards,
Elizabeth