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It's typical here, but this is a rapidly growing area with a shortage of homes.
We are a hot market too. We only have one national builder in my area right now, as most of our new construction is by local builders. The national builders definitely do things differently, but out here they are getting multiple offers when they place it up for sale which is when it is being framed. So the buyer gets to pick one of three color packages.
Major national builder is building out a development of single family homes. Builder is spec'ing out the homes themselves, that is, you can't go in and choose a model and tart it up the way you want it - they're doing it on the front end, and of course, with the more expensive and upscale options.
Want one of these homes? Get on a waiting list.
Here's what happens:
Builder finishes a particular model. When it's complete, they contact people on the waiting list for that model. They give the list members the selling price, and then a five day period in which they can place sealed bids for the house over and above the selling price listed by the builder. When five days are up, the builder sells to the highest bidder.
I met a representative of this builder to look at one of the homes they were building. When they described what they were doing I asked them if they thought the approach of putting the homes up for bid was ethical.
I don't think it is. Am I being too harsh?
Not only that, I can't imagine these places appraise out for the selling price. With that in mind, I have to assume that buyers are paying cash and/or making up the difference between the appraisal and the selling price?
RM
Can you explain what you think the ethical issue is? I don't see a problem. If the houses are selling for those prices, they will appraise.
If the houses are selling for that price, why won't they appraise for something in that ballpark? That is what the comps show the current market value is. Even if it's based on more expensive options, it's still the selling price for comps that have come before.
And fwiw, when I built new construction in 2014, my house appraised at 10% above the contract price from 5 months earlier, which was consistent with the comps that had sold in between when I signed and when I closed.
We listed our house Friday and we got feedback from a showing about what they thought it would sell for. They said "It is probably worth $x but will sell for more". This person clearly has no understanding of the concept of value. It's worth what it sells for unless the buyer and seller have some pre-existing relationship or the buyer or seller is under duress to act for some reason.
What's interesting to me is that there is nothing that could be more ethical in this situation, except going to an open bid situation. It is extremely transparent; Here's the house, the lot, bids are due Friday.
Think about it. There's no "hide the pea in the builder's grade stove." There's no wondering if the next guy got a better deal negotiating upgraded LVP flooring or nicer cabinets.
Funny, how consumers often don't realize transparency and narrowly defined terms often aren't in their interests at all.
A house is worth what someone will pay for it, but the devil is always in the details. Now, there's no details. Just a house, and a bid.
I see nothing even remotely unethical or sketchy about this. How many real estate listing are you seeing with language like "Best offers due by Sunday, seller will evaluate after all offers are submitted."? I see a lot. This isn't really any different.
Yes, it's legal and ethical. Seller is selling to the highest bidder and nothing is being hidden or misrepresented in the process. The only reason you don't approve of it is because you're trying to buy a house while other people with more money than you are bidding up the price to more than you want or can afford to pay. I can understand your frustration, but that's the situation we're in right now with regard to houses in desirable locations.
Uh, I never said I was buying a house. I was speaking to the builder about a possible custom build on my property. I never questioned the legality of it, either.
Uh, I never said I was buying a house. I was speaking to the builder about a possible custom build on my property. I never questioned the legality of it, either.
Please don't put words in my mouth.
RM
Well, for someone who wasn't even interested in buying a house from a builder, you sure seemed awfully concerned about how the builder goes about selling them.
Further, you DID question the ethics of the builder, and so far, everyone who has posted on this topic has found nothing at all questionable about the builder's ethics. Since you didn't directly state exactly WHY you were questioning the ethics of this builder, I could only assume that you were considering buying a home from him.
in truth, he never SAID (or typed) he was trying to buy one of these homes. He only inferred it to the point everyone responding thought he was.
Quasi-off topic ... I wouldn't have a "big national builder" do my "custom home" on my own lot. Not in these times, where the demand for their own production is so extreme.
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