How to Handle New Construction in a BPO
New-build sales are tempting comps but they come with builder pricing and incentives. Here is how to use them.
When a subject property sits near a new subdivision, the most recent sales are often brand-new homes sold by a builder. They look like perfect comps. Often they are not.
Builder sales versus resales
A builder sale includes a new-home premium, builder upgrades and sometimes incentives such as closing cost help. A resale of a five-year-old home in the same subdivision is usually a better match for a typical subject. Use resales first where they exist.
When the subject is new construction
If the subject itself is newly built, recent builder sales of the same model can be appropriate. Note the model name if known, the lot position, and any visible upgrades. Be careful with list prices on the builder's website; they may not reflect what homes actually sold for.
Watch for incentives
Recorded sale prices do not always show incentives. If you know a builder is offering significant concessions, mention it in your comments so the client understands why the recorded price may overstate value.
Older homes next to new ones
- Do not assume an older home is worth the same as new houses nearby.
- Adjust for age, condition and updates.
- Note if new supply is competing directly with resales in the area.
Explain your choices
Whatever you decide, write a sentence or two explaining why you used or excluded new-build sales. Reviewers question this often, and a clear comment heads off a revision request.
Use the listing history
For resale comps inside a newer subdivision, check whether the original buyer paid a builder price and what the home sold for on resale. The difference can tell you a lot about how the market treats the new-home premium in that neighbourhood. If the subdivision is still selling new homes, also note how many are being built nearby; heavy new supply can slow resales and affect your marketing time.
Keep a short reference list
If you work an area with ongoing building, keep notes on which subdivisions are active and roughly when they started. It saves research time on the next order.
Related: how to handle BPO revision requests.