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Custom home builders and master planned community builders struggle with falling appraisals

by Nashville Business Journal - by Stephanie Hardiman Staff Writer - 06/10/2009
 
"Custom homeowners and builders are facing what appraisers and real estate agents are calling the strongest buyers’ market in the history of Nashville — and that means homes may be appraised for less than replacement value."
 
Custom homeowners and builders are facing what appraisers and real estate agents are calling the strongest buyers’ market in the history of Nashville — and that means homes may be appraised for less than replacement value.

Buyers simply aren’t willing to pay dollar for dollar what a home is worth, pushing home prices below the actual cost, says Murray Huber of Huber and Lamb Appraisal Group. Yet buyers still want all of the amenities of a custom-built home.

“Buyers want everything along with lower than low prices,” Huber says.

Huber spoke Tuesday to the Custom Builders Council of the Home Builders Association of Middle Tennessee at a lunch-time meeting in Brentwood.

It was the third part of a speaker’s series organized by council president Chris Parker and aimed at the confusion swirling around the troubled housing market. In February, Parker invited a panel of bankers to speak to the builders, followed by a discussion with real estate agents in April.

Parker is worried that lower appraisal values are forcing otherwise stable builders to close their doors because they cannot make enough money to support their businesses. He would not name specific instances, but said some homes are fetching up to $1 million less than they cost to build.

“We cannot build for those prices,” Parker said.

When homes are appraised for less than their replacement value, it brings down prices across the entire housing market. And when homeowners want to sell their homes, they will be offered less than they are worth.

Parker said that the new process of hiring an appraiser under the Home Valuation Code of Conduct passed May 1 is “scary” for builders because appraisers are randomly selected from a pool. This was done to increase appraiser independence, but Parker said an appraiser drawn at random may not have the experience in a certain market to obtain an accurate value.

Huber said that while this is a concern, appraisers are not supposed to evaluate homes outside of their market area. Talking with appraisers about their qualifications and sharing specifics on the home with them could help solve this problem, he said.

“I don’t envy your positions because you’re in the middle,” Huber told builders. “Communication is important for all of us to get through this.”

Article compliments of www.MPCJobs.com
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