When building a home act like appraisers do. Main Idaho Real Estate Insights
The most important cost of a home is the lot price/ value.

I have been doing more lot costs research and found a subdivision that I had a hard time believing that someone could finance the lots. Are the lots worth the asking price? It is a beautiful subdivision and has lifestyle written all over it. The problem is the appriasal.

Appraisals have nothing to do with its value to the buyer. it has to do with the bank and risk. If the appraisal is out of line with what the lot could sell for fast if you, the buyer, default on the property. That is why so many builders are frustrated with the current market conditions. If someone walks in and agrees to the price and teh bank does not, the deal is over. Of course, on higher end homes it gets even trickier.

For example, Stonebriar on the River in Star, Idaho. Asking price for lots- $395k. In theory, when building a home the  lot is 25% of the total cost of building a home. So in this scenario, we a re talking about a home that will be worth about $1.6M. What bank is going to finance that amount in the current conditions. Even if the buyer put $600k down, the bank has to look at risk and it is unlikely that the bank could resell the home quickly for  a million dollars.

What is the point? Do your homework. Talk to builders, your bank and other industry professionals so your expectations are not unrealistic.

Trey Langford

Posted by tlangford at 5/28/2009 12:37:00 PM
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