Our SR called us late Monday and said that
Ryan Homes would be able to lower the build price to help close the gap between the build cost and the appraisal, but obviously not the whole $27,000. We have presented a counter offer to their solution and are waiting to hear back, hopefully on Thursday. It is good to see that
Ryan Homes is willing to work this all out, but it worrisome that it’s a problem to begin with.
As my wife had mentioned in the previous post, we were expecting this to happen, but not because
Ryan Homes warned us. In fact, I was the one who brought it up to both our SR and the NVR mortgage rep at the initial contract signing and the mortgage application. The response from both of them was, "It almost never happens." Well,
Ryan Homes’ definition of "almost” must be different from everyone else. We are not the first customers to whom this has happened, not even the first in our community to have a low appraisal, and we likely won't be the last.
I think the low appraisal happened because of a few factors. First off, the housing market sucks. Home prices declined here in
Ohio just like the rest of the country, and the homes in the $300+K range took a big hit.
Ryan Homes did not "adjust" the home prices to reflect this change, at least not to the same percentage, and it’s understandable why they didn't. There is a difference between "cost" and "value", and it can be a large difference. The cost of building materials and labor has not gone down along with the home "values". Should
Ryan Home start to use even cheaper materials or squeeze their sub contractors? Maybe, but at the same time I don't want to buy a home with even lower quality materials or labor.
Maybe Ryan Homes should lower their expected profit margin, and maybe they already have done that, but I don't expect them to start building homes at a loss.
My wife and I are adding a lot of options to this house, many of which do not add value, such as the whole house audio system (including outdoor speakers) and surround sound in the media room. This home is also going to be approximately 4400sqft of finished area, but only a 4 bedroom with 2 full and 2 half baths on less than a half acre. Homes in our area with similar finished sq ft are often 5 bedroom with 3-4 full bath and sitting on more land and that’s what buyers expect, so that doesn't help with our appraisal either.
Fingers Crossed your deal with work out!!
ReplyDeleteBTW--the information provided here makes for a great post! Thank you for sharing! We are in the same position, we have same amount of house that you do and many many many upgrades; however, have not made it to the appraisal stage. Our SR suggested that we may not, so we opt out of finishing the two storage rooms in the basement to reduce the cost.
Thanks! It is something that we were worried about from the start. I hope you don't run into any problems, but it's good that you're at least aware of it as a possible issue.
DeleteI agree this is great info. I was worried about the same thing happening to us even though we did not add a ton of upgrades. I am curios as to how Ryan was handling it if you walk away. We are in framing right now and as far as I know there has been no appraisal, but I do know that we are one of, if not the most expensive home built in the neighborhood to date. My question is will they give you all of your money back if you cannot close the gap? Do they let you walk away clear of any contract issues?
ReplyDeleteI am curious to see how they will handle it as well. I'm assuming, since they were already willing to give us our money back before (see our previous post: "A talk with a Ryan Homes VP"), that they will refund us what we've already paid and let us part ways. We're not at that point yet, but we'll see. And, of course, we'll let everyone know what happens -- either way.
DeleteI hope it works out. I have some of the same concerns myself. They have just completed drywalling our house and of course there has been no appraisal. If our house does not appraise and we can not come to some resolution with Ryan are able to ger our money refunded? That I guess is the million dollar question. I dont think Ryan wants people to walk away so I believe that they will be more inclined to come up with a proper resolution. I do still believe that there houses are still overpriced and that is probably because of the profit margin they expect to make as you have stated in your post. Once again good luck to you and I do hope it works out
ReplyDeleteJesse - I just the other day was looking at the Pittsburgh Multi-List and found several 3-5 year old RH houses for sale not that far from where I'm building. School district not as good, and yet they are still asking 50-100k more than what our house is clocking in at (and that's with a lot of upgrades). Double checked on Zillow and found some sold comps in the same range! If you are nervous, you should give a look.
DeleteUP - Are you working with a real estate agent? Usually they are pretty good at finding comps to support whatever appraisal you need.
Yes I do have an agent and I'm going to let him know my concerns about this so he can do some research. Were building in Pine-Richland and the house I sold was in Pine Richland. My old was older and sold for a lot more than I purchased it for and had no problem getting appraised for the amount we needed. Pine -Richland is sought after area so I may be getting nervoud for no reason
DeleteWe are not working with an agent, so I guess we're just going on what the RH appraisal is telling us.
DeleteOur neighbors had a similar situation. Someone suggested they meet Ryan half way. The declined. I really urge you not to pay more for your house than it's worth. And if you pay more than the appraisal you will. They'll drop the amount. It actually happened to the person two doors down and the person across the street from them. In both cases Ryan ate the total amount.
ReplyDeleteThey don't want to let you walk away, because the easiest person to sell this house to is you. What other people are going to come along and pay more than appraisal cost on this home?