Builder Incentives Can Distort Home Value

As builders get creative with rebates and incentives, Fannie Mae raises the red flag to lenders citing "Value Distortion". Situations such as this: "shows signs of price distortion is the sale of a home on Olen Mattingly Road in Avenue, Md. The two-story, 2,158-square-foot home, built within the past two years, was originally listed for sale in February 2005 for $635,000 but languished on the market for more than a year, according to local real-estate agents. The owner, builder Bennett Homes LLC, gradually reduced the price to $469,000 by March 2007. In May, however, the home sold for $600,000, far above the recent asking price. Vangie Williams, a real-estate agent who represented the buyers, says the sale involved a payment by the builder to an organization that collected fees for finding buyers." , are prompting Fannie Mae to tighten disclosures of incentives and rebates to ensure banks are loaning on true values of homes. Builder Incentives Distorting Values

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