New Builds and Low Appraisals
📉 New Builds, High Prices, and Low Appraisals: What Agents Need to Know (and Do)
At StreamLine Marketing Pro, we believe strong agents don’t just react to market shifts—they get ahead of them. One growing concern we’ve seen across multiple markets is the rising risk of appraisal shortfalls on new construction homes—and the financial consequences are real.
🏗️ The Current Reality: Incentives Without Price Drops
Builders are still charging a premium for new homes, despite market conditions stabilizing—or in some areas, softening. While builder incentives like closing cost assistance and lower-rate financing are helping buyers get into homes more easily, they’re not reducing the actual purchase prices.
That gap between perceived value and contract price is creating a perfect storm when it comes to appraisals.
📉 The Risk: When Appraisals Come in Low
At SLMP, we’ve seen shortfalls range from a few thousand dollars to tens of thousands—and even up to $80,000 on luxury new builds. This isn’t a one-off issue. It's a trend, and it carries serious consequences:
FHA/VA Buyers: These programs have strict loan-to-value requirements. A shortfall could price the buyer out entirely. (The FHA/VA Amendatory Clause Form comes into play here as well.)
Conventional Buyers: Shortfalls mean more cash out of pocket—money they may not have or didn’t plan to spend.
Cash Buyers: A low appraisal doesn’t change what they can pay, but it does impact long-term resale and equity.
And here’s the kicker: Some new construction contracts include blanket clauses stating the buyer is responsible for any appraisal shortfall—with no termination rights if the home doesn’t appraise.
💡 What Agents Should Be Doing
As real estate professionals, we’re not just tour guides—we’re trusted advisors. Here are practical steps every agent should be taking:
✅ Educate Buyers Early
Set expectations that a shortfall could happen.
Help them understand what that could mean for them, based on their financing and contract terms.
Make it standard practice to say: “I recommend having an attorney review any builder contract before you sign.” Even if they don't take the advice, you gave it.
🏘️ Ask for Builder Comps
Many builder sales aren’t listed in MLS, so be proactive: ask the builder directly for recent comps supporting their pricing.
If it’s a long-term build, take into account where the market may be heading when the home is finally appraised.
⚖️ Understand the Contract Terms
Some contracts give buyers no out if the home under-appraises.
Others allow for negotiation or termination. Either way, you must know what your client is signing.
For FHA/VA - Make sure the FHA/VA Amendatory Clause form is part of the contract at signing.
🚨 Watch for Lender/Builder Behavior
Some in-house lenders pressure buyers or even share confidential info with builders.
We’ve seen situations where buyers were told to sell their only vehicle to make the loan work. That’s not a solution—it’s a red flag.
🔑 The Agent’s Role: Be Calm, Confident, and Clear
Great agents don’t scare clients—they prepare them. It’s our job to help them navigate risks like appraisal shortfalls with clarity and strategy.
By being proactive, transparent, and prepared, you protect your client and yourself. Nobody wants to hear months later:
“You should have known…”
💼 How SLMP Helps You Stay Ahead
At StreamLine Marketing Pro, we go beyond just tools—we support you in all things real estate so you can confidently handle complex transactions like these. Whether it’s coaching, systems, or strategic guidance, we’re here to help you:
Educate your clients
Protect your reputation
And close deals the right way
Let’s face it: real estate isn’t getting easier. But with the right tools, mindset, and support—you don’t just survive. You thrive.
