As-is Value On New Construction

[Dublin ohio]

For a transaction financing construction or renovation of a building

But these appraisals are not for financing construction. As the OP stated they are not construction loans.

 

[hastalavista]

For Fannie/Freddie financing, an as-is value during construction is typically not required. That is why most of those valuations use a hypothetical condition that construction is complete as-of the date of the inspection.
For a non-Fannie/Freddie loan following the Inter-Agency Appraisal and Evaluation Guidelines, an as-is value is required. Further, the completed value is typically required to be prospective.

Some clients may mix the two up; and there is nothing from stopping a lender who intends to sell to Fannie/Freddie to ask for an as-is value in the current state of construction.

Most of the time, for the banks I work with, the appraisal is ordered pre-breaking ground or only after some minor site work. The assignment requires an as-is value of what exists (vacant site ready for development) and a prospective value based on the date the completion is expected achieved. It is prudent in a prospective value to use an extraordinary assumption regarding completion time and market conditions between "now" and "when complete", but not required (I'd use them). One does not need a hypothetical condition, and I would argue that the hypothetical condition doesn't meet the IAEG requirements.
Where it gets complicated is as MichCG points out: A house that appears to be 50% complete becomes complex; and there are more things to consider than just the cost to finish. And, yes: the fee for this assignment should reflect its complexity.

 

[hastalavista]

They want an "as-is" value in the report that is being completed "subject to". It serves no purpose and to me is misleading to someone reading the report.

How can an appraisal report, that describes the as-is condition of a property, and values the property as-is, be misleading?

 

[JoshDavis]

How can an appraisal report, that describes the as-is condition of a property, and values the property as-is, be misleading?

If i'm describing it subject to being completed, I'm not valuing it as is

 

[JoshDavis]

So they want an "as is" value and a "subject to completion" value?

They want me to add an as is value on a subject to report

 

[BRCJR]

If i'm describing it subject to being completed, I'm not valuing it as is

If subject to being completed and the construction has not started the land is typically your as is value.
The lender wants to know as is values because they may have to take it back during the construction phase. That is the risky time of the loan.

 

[JoshDavis]

If subject to being completed and the construction has not started the land is typically your as is value.
The lender wants to know as is values because they may have to take it back during the construction phase. That is the risky time of the loan.

That is not the case with these properties. These are not construction loans

 

[JoshDavis]

I'm talking about cookie cutter homes in residential neighborhoods being built by a builder like DR Horton, KB Homes, Toll Brothers, Lennar, Taylor Morrison, etc.

 

[BRCJR]

That is not the case with these properties. These are not construction loans

Not sure I understand how, "I have a client that just recently has started asking for an as-is value on new construction properties" aren't construction loans.
Maybe I cannot see the forest for the trees, I may be a little slow catching on but, please explain.
What are they doing with the money?

 

[JoshDavis]

Not sure I understand how, "I have a client that just recently has started asking for an as-is value on new construction properties" aren't construction loans.
Maybe I cannot see the forest for the trees, I may be a little slow catching on but, please explain.
What are they doing with the money?

These are not buyers who own a lot and are having a custom builder come in and build the home. These are cookie cutter homes in residential neighborhoods where the buyers pick a model then add their options from the builder. The builder is selling the home to the buyers and they buyers are getting a mortgage for their new home from this lender.