Hey Mike Rock ... can you weigh in on this subject from a builders point of view?

Praful,

Surely it does not matter what the builder like or does not like.  The buyer should have a  inspection contingency.  Regardless, how good is the builder is, there may be something that comes up.  A

that contingency is in every contract I write.  I never want a buyer to pay more than appraised value without it being a clear choice.

It all depends on the community the property is in.  Is it all new construction with bunches of comps from already completed homes?  Or is it new construction from bulldozing a house in an established neighborhood and building over the foundation?  I think that it would be more important in the second case where comps could be hard to come by.  

=====+++++ never ever even consider waiving an appraisal for new construction, build to suit construction. never . nunca. you are exposing yourself tremendously. However... do be armed with appropriate comps, and understand what NEW means and the % factor your appraiser allows for this. since we have so few new customs here i our area, appraisal can be difficult.. thanks  Carol Williams  for pointing this important question out.

btw, these can normally be done with a floor plan, elevation and a cost breakdown and line by line. so can be done prior to construction.

Few sellers of any type like contingencies, but it is best for the buyer to have them unless they have a bit of cash

Praful Thakkar How else can the buyer protect them self against paying too much. Since there is a mortgage contingency, the lender will require an appraisal. You buyer may want to look else where.

Most Builders have a clause in their contracts that a Purchaser shall pay cash for any options that may run the sales price above what the base price of the model they are Buying is for a certain community. Unless the financing is FHA / VA most Builder contracts I have seen do not have an appraisal clause in them.

I would assess the buyers plan B.

Nearly 60% of residential sales in Pinellas County Florida are cash sales. The next buyer is only one silly decision away.

Knowing the SELLER values the assurance of closing highly, I would advise the buyer to avoid a silly decision that comes wearing a contingent suit. 

Pay for an appraiser and/or be willing to make up the difference, if you really want the house.

"BUT I don't want to overpay!" That's why you hired a professional.

This is a great question. I never waive the right to negotiate an appraisal issue with their lender or ours.

When my buyer is using the developers lender (to receive all the perks & extras), they typically have that appraisal covered since they are creating they're own comps. The lender wouldn't lend on it otherwise X 100's of borrowers in theory I realize.

Caveat: if you are buying in the early stages of a new development or new phase, where they've raised the prices, I'd just simply insist on an appraisal & protection against any deficit of value.

Very important...it can help on cost overruns by the builder that need not be

It would be my recommendation to have the appraisal contingency in the contract.

I would always advise that the buyer have that contgency.

No never waive the appaisal contingency.  I had a new home appaise for 19,000 less than the list price the buyer would be force to buy the home without the appraisal contingency.

The appraisal is usually covered by the financing contingency. An inspection contingency might equally as important.

I always recommend an appraisal .

Good morning Praful. Extremely important, as I have seen many come in below the price of the package. If there is a lender, it will be a requirement.

It is vitally important in our market where the majority of new construction homes sell VA. VA requires that appraisal clause.

no way! Definitely want an appraisal

Praful,
It depends on the lender and whether or not your loan is going to be sold. Buyer might not care if new construction doesn’t appraise but most lenders will.

Absolutely. Things change

My new home contracts automatically have that in there if financed.

In Denver, unless it is a small builder, all new construction is done on a builder contract, and there is no appraisal contingency.

Praful - From what I can tell, it is your buyer that wants to waive the appraisal contingency because they want to purchase the home at any cost. I would imagine if they have the means to pay for the home "at any cost", then they can waive the appraisal contingency, but I would get something in writing from them that states exactly that, so you can CYA. Of course I would not recommend they waive the appraisal contingency, but I am not buying the home.

I would never wave the appraiser contingency, unless it is a cash offer. The new constructions are always price above market value. Too much risk for my client. 

Construction may take a long time and the market could change in the meantime, in either direction, so the language needs to be drafted carefully.

I don't have much new construction experience, but I would think it's just as important as any other residential transaction.