Buy a new house - square footage discrepancy (loan, buying a home)

[formosa]

I am in a contract of buying a new house. I got the appraisal report today and it seems the square footage is 9% smaller than the builder’s advertised square footage. However, the house value on the report equals to the price I offer. In the purchase agreement, it says:

“Home/lot Square Footage: The Home and Lot square footage may differ from the square footage of model homes or those values shown on advertising brochures. These values are based on good faith estimates. Minor variation in size may occur between homes of the same floor plan. Buyer waives any claims relating to variations in the size of the Residence or lot which do not exceed five percent (5%) of the total square feet.”

Now it is 9% smaller. Can I still ask for a price reduction? What is the best strategy to do that?

Thank you!

[Nell Plotts]

I don't think 9% is minor, by their own contract language you aren't "under contract". They can't say 'yes' to a price reduction unless you ask. FYI I would not show them the appraisal.

The best negotiation position is the willingness to walk and your willingness to walk is their greatest fear. If they want to hold their own market value up perhaps you can negotiate for upgrades or better terms.

[davemess10]

Have your gown out with your Realtor and measured it yourself? Or did you have a home inspection done?
I would double check the measurements before further action.
Was it a case of them counting a partial basement as livable space, or such? That can definitely be a problem when buying a home.

[Random_Walk]

Definitely double-measure the beast, but definitely use it in negotiation. There;s no reason for you to get shafted by a seller, even over a 9% misstatement in size.

[Nell Plotts]

I am the wife of a retired architect so there is no denying I have an 'attitude'. A label I wear proudly in many areas. I would NEVER buy a spec built house. If I didn't build it and oversee its construction I would buy a house old enough to show its imperfections. BUT the OP had decided to buy a new house so I will go with his decision.

A qualified buyer is a precious commodity for a builder. Keep that in mind. Tell the builder that the appraiser came up with different square footage and see what s/he says.

First you should have a home INSPECTION, not just an appraisal. Builders will puff their chests and proudly state that it complies with the building code. Keep in mind that code is the MINIMUM standard and it by no means says that it was well built. Find the most anal retentive inspector you can find, even hire an architect (many are very short of work right now, hire a middle aged one by the hour because they have been around several construction cycles). I know this sound like a lot of un-necessary expense but buying a home is serious business, you need to have as much information as possible. The contractor will not like this but remember you are in the cat bird seat. If they don't want you to bring your team to the table they are afraid of something.

After you have heard your team's critique then decide what to do.

[formosa]

Actually I have finished the home inspection and now I am in the stage of finalizing the loan. The appraiser came to see the property for lending purpose. I measured the house myself pretty early before the home inspection. The number was short but not that extreme. I don’t know if I can trust my own measuring skill. I thought the appraiser is more professional. They probably don’t make mistakes, right? I will definitely negotiate the price down but in the meanwhile I am thinking about hiring a professional to measure the house again.

[Random_Walk]

What Nell was also getting at is not just for measurement, but also to check for defects, potential design and construction goofs that would cause future problems, and things like that.

For instance? If the place has two bathtubs and a shower, but only a 20-gallon hot water tank, someone is going to get chilly. If the electrical panel is completely full (with no empty slots) and/or only distributes a maximum of 200 amps, you're going to have a tough time putting a hot tub in later on. If you have a crawlspace that hadn't been sealed properly, then say hello to dry rot and mold in the floor joists 5 years down the road. No zinc strip (or similar anti-moss measures) on the roof? Better get used to climbing a ladder to sprinkle anti-moss powder on the shingles once a year.

I promise you that I'm no expert, but I got to experience all of those in the past out here.

[davemess10]

Originally Posted by formosa

Actually I have finished the home inspection and now I am in the stage of finalizing the loan. The appraiser came to see the property for lending purpose. I measured the house myself pretty early before the home inspection. The number was short but not that extreme. I don’t know if I can trust my own measuring skill. I thought the appraiser is more professional. They probably don’t make mistakes, right? I will definitely negotiate the price down but in the meanwhile I am thinking about hiring a professional to measure the house again.

And what did the appraiser say? Are they willing to give you the loan based on their measurements (as in do they think it's a fair price for their measured size)? If you're still getting a good deal based on their measurements (and everything checks out with a home inspection), then I would just continue on. I guess you could use it for bargaining leverage, if you felt like you still wanted a discount. But do the actual measurements change how the house feels/looks to you? They're just numbers.

[formosa]

Originally Posted by Random_Walk

What Nell was also getting at is not just for measurement, but also to check for defects, potential design and construction goofs that would cause future problems, and things like that.

For instance? If the place has two bathtubs and a shower, but only a 20-gallon hot water tank, someone is going to get chilly. If the electrical panel is completely full (with no empty slots) and/or only distributes a maximum of 200 amps, you're going to have a tough time putting a hot tub in later on. If you have a crawlspace that hadn't been sealed properly, then say hello to dry rot and mold in the floor joists 5 years down the road. No zinc strip (or similar anti-moss measures) on the roof? Better get used to climbing a ladder to sprinkle anti-moss powder on the shingles once a year.

I promise you that I'm no expert, but I got to experience all of those in the past out here.

I got a good inspector who checked the property very closely. There are something need to be fixed but not major. They are all fixable. The builder will fix all the problems before the walk through day. I will also do a re-inspection to confirm the problems are solved. I also did sewer scope and radon. All turned out good. Now my only concern is the size of the house. I worry that I will overpay for the square footage and never get the money back.

[formosa]

Originally Posted by davemess10

And what did the appraiser say? Are they willing to give you the loan based on their measurements (as in do they think it's a fair price for their measured size)? If you're still getting a good deal based on their measurements (and everything checks out with a home inspection), then I would just continue on. I guess you could use it for bargaining leverage, if you felt like you still wanted a discount. But do the actual measurements change how the house feels/looks to you? They're just numbers.

I can still get a loan since the appraised price is equal to my purchase price. However, the appraisal just confirmed my suspicion. The house is indeed smaller than the advertised size. I thought I got a good deal but now the size shrunk and I am just paying the fair market price. I have to say the report did change my feeling of the house.