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Construction Loan Appraisal

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Ray Miller

Thread Starter
Elite Member
Joined
Feb 20, 2002
Professional Status
Licensed Appraiser
State
Wisconsin
I know I am out of my league here. But the lender just fax me an order to do a construction loan appraisal. the only thing they sent was the sketch of the floor plan. A copy of "Amendment to Lease" on the land, where the applicants have been given a 90 extention on the lease, in order to get the construction loan to buy the land and pay for the construction of the home.

What gives with these loan officers? Do they have less knowledge then I do?

Common sense tells me that if I were to do a construction loan appraisal, I would need a complete set of working blue prints, correct.

Any insight, when I give this back to the lender in tomorrow. Which direction should I point them?

:roll:
 

Jeff Horton

Senior Member
Joined
Jan 15, 2002
Professional Status
Certified Residential Appraiser
State
Alabama
You need more than just a sketch on a peice of paper. With that said I have done them that way though. But I talked to the owner and or builder to determine what quality level the house was to be built to. I was also careful to state what I did and what I was assuming. I made the appraisal conditional on a final inspection and stated that if the house is not built as assumed the value may change.

So yes you need more information than what they have provided.
 

Mountain Man

Elite Member
Joined
Jan 15, 2002
Professional Status
Certified General Appraiser
State
Georgia
Unless the builder is in MY Rolodex of trust worthy builders that I know can do the job, sorry.... get me the full set of plans and specs.

I also make all construction appraisals subject to verification of measurements, as well as the completion of construction. Can't tell you how many times I have gone out to do a draw, and find the builder decided to use "the other plan". :roll:
 

rtubbs

Junior Member
Joined
Jan 15, 2002
I don't like to, but I also work with plans of various forms (unless it's HUD or Farmers Home). I have an abbreviated form of the standard HUD/VA specs that I go thru with the builder/homeowner. That it allows me to adequately know what's being built and transfer to the URAR.

The main thing I stress is that I will be doing a final inspection and certifying to the lender that the improvements are competed as we're discussing. If you want to add something that has a positive affect on value, that's okay. If you make a change that negatively affects value, we will have a problem.

I prefer a complete set of plans and specifications but that rarely happens.
 

Restrain

Elite Member
Joined
Jan 22, 2002
Professional Status
Certified General Appraiser
State
Florida
The idea is to get enough data to perform the report. Generally, a phone call that "this dog just ain't agonna hunt" unless additional info is provided gets their attention. If you get enough that you believe that you can accurately complete the report, then go ahead. Document the specs and sources as best you can. If the lender doesn't like it, they and the borrower will get together to get you the data you need.

Roger
 

Lee in L.A.

Elite Member
Joined
Jan 24, 2002
Professional Status
Certified Residential Appraiser
State
California
for these I need architects plans, cost breakdown, and material specs. This is "usually" the minimum I need, assuming this is proposed or early stage construction, not 90% complete.
 

Charlotte Dixon

Senior Member
Joined
Jan 16, 2002
Professional Status
Certified Residential Appraiser
State
Delaware
I don't budge until I have a full set of plans and specs, and I insist on speaking with the builder if the subject is a custom home. If the builder doesn't call me back the file sits on the back burner until he does. For tract style housing all I get from the sales agent is a picture of the house, which has just room sizes. That's when it gets difficult! I usually visit the construction trailer to look at the blueprints of that particular model, then check the contract to see if there were any changes/bump outs or expansions. The new construction supervisors are usually very helpful around here. Once in awhile I get lucky and the model home is the same as the one I'm appraising, and I can measure that. I only use this practice for tract style housing if they have 3-4 different models, and of course, I note in my appraisal that prints were not provided and note the above procedure. I measure the finished product.
 

Dee Dee

Elite Member
Joined
Jan 16, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
Since literally ALL new construction in my area is custom built, architectural blueprints are mandatory.
I'm never satisfied with a general description of the finish details when given verbally because the difference in value estimate can swing so wildly between homes with standard (cheapo) materials vs. top-of-the-line.

I always require that the builder (who is frequently the owner) give me written and signed specific details on cabinetry quality, flooring, roofing materials, windows, fixtures, heating systems, plumbing fixtures, etc... That information is then attached to the appraisal and it is referred to in my addendum. This is major ammo if the builder/owner deviates from the plans and specs that were provided to me for the appraisal, making it impossible for them to deny or lie about what MY understanding of the project was.
 

Bobby Bucks

Elite Member
Joined
Jan 27, 2002
Professional Status
Real Estate Agent or Broker
State
North Dakota
I'm reached the point where I only do custom assignments if I know the reputation of the builder. I've spent too much time chasing them down for plans and specs. For tract built, ditto the developer and the lender. If there is any doubt, I simply refuse the assignment....I've seen too many cases where the end product is 300 SF less than plans and I'm in the middle and expected to be a free consultant/pin cushion while they all fight it out.......funny, I've only seen one case where the house significantly "grew" from the original specs. They typically shrink. I've also found doing new construction to not be cost effective unless you're familiar with the neighborhood and builder......I want to puke when I get a request from a LO and they expect a "volume" tract home discount when their pet appraiser is on vacation.
 

Mike Garrett RAA

Elite Member
Gold Supporting Member
Joined
Jan 14, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
I do a lot of new construction appraisals for the VA. Minimum package includes:

1. Contract. Be sure you have all the change orders!

2. Plans and spec sheets

3. Copy of the Improvement Location Certificate.

Other things that are most helpful:

1. Marketing floorplan (I typically make a copy and do my measurements on it and then scan into report since the plans are too big.)

2. Price list and options price list.

As a final thought, if you are going to do a lot of new construction appraisals start a file for each builder. Ask the builder's sales rep for a "REALTOR® packet" It will typically have lots of information on the different models, options, lot sales, and home sales in the subdivision. I have approximately 30 different builders in over 100 subdivisions on file. I make a copy of the 1004 and keep that in the subdivison file. On the front of the file folder I list all the appraisals done in that subdivision. Other data includes Census Tract, Flood Map Info, HOA info, Location maps, and phone numbers for the sales offices. Now when I get an assignment I go right to the subdivision file first. I usually have everything needed to do the assigment including comps used in previous reports.

I lied....a final final thought. I have a sheet that I fax to the builder's sales office stating I have been assigned to appraise Model # 1234. It is set up for them to respond with any current sales of the same model AND the names of other builders in the same subdivision. Typically I like to use one sale from the same builder, one from a competing builder, and one re-sale. From there it goes downhill. In many of our newer areas there is only one builder and no resales. There are differing opinions on how to handle this BUT I will tell you that the VA leaves it up to the appraiser. There is no hard and fast rule.
 
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