How do they appraise an unfinished house?

[ABLACKSTON]

I'm getting a loan on a second home of mine that I am remodeling. I have built a large addition onto the house and the entire outside of the house is finished. However, most of the inside of the house is not finished. I was wondering how an appraiser will appraise and unfinished house. Also, how big of a part does land play in an appraisal. The house sits on 14 acres and I was hoping this would help with my value. Any input would be appreciated. Thanks!

 

[Thomas Fiehler]

The appraiser will need plans & cost data on the unfinished part of the house. Also, any changes to the existing structure needs to be pointed out to them. It is usually fairly simple and similar to a new construction appraisal on a house not yet built. The land will add value to the finished $$ but just remember that cost may not equal value.

 

[jakeboeger]

Usually per plans and specifications based on the hypothetical condition that the work has already been completed.

It could also be done "as-is" but less common and much more difficult.

As far as your land goes, it depends on your market.

 

[Scott R Marshall]

I cannot comment on your land situation as every market is different and contributory value of the land is different, I'm sure, even within your own state, as land values can differ drastically. As for your remodel project, the only way I would recommend it being appraised is "subject to completion per plans and specs". This would require you providing all the necessary documentation regarding what the addition will eventually be. Chances are your particular lender would treat this more like a construction loan and require a final inspection by the appraiser once the work is complete to verify that all is as you said it would be. Hope this helps.

 

[rcsone]

......value for land and finished/semifinished/etc could be developed through the appraisal process........banks routinely do construction loans where the funds are advanced at some completion status and term.........also could you not on a front and rear dual wreaked auto fix either end or both for two sums with value adjusted according to expense and progress and resulting finished value??...best to all.....rs

 

[Walter Kirk]

The first thing that the appraiser looks at is the land. The appraiser will determine the highest and best use of the land. Then the appraiser will consider the improvements, buildings, utility connections, landscaping etc.

When improvements are under construction , or renovation, the appraiser should be provided with the plans and specifications of the work to be done. In a situation where the work is not finished and an as-is value is requested the appraiser will determine a "cost to cure" to finish the work.

This amount will not be subtracted dollar for dollar from the market value of the property as improved since the typical buyer would pay less for a property needing completion.

 

[The Warrior Monk]

I'm getting a loan on a second home of mine that I am remodeling. I have built a large addition onto the house and the entire outside of the house is finished. However, most of the inside of the house is not finished. I was wondering how an appraiser will appraise and unfinished house. Also, how big of a part does land play in an appraisal. The house sits on 14 acres and I was hoping this would help with my value. Any input would be appreciated. Thanks!

The issue isn't with the appraiser; it's with the lender. Lender's will lend on these types of properties, but it's not the standard Fannie/Freddie loan. The lender may want to structure it as a construction loan, or there can be other situations where they might encumber other collateral depending on the situation. One the way the loan is structured is determined, the next step will be the instructions to the appraiser.

 

[Mike Kennedy]

Ditto David. Case on point - 3 years ago was assigned a conventional mtg loan appraisal on a SFR Two Story Raised Ranch 2250sf on a slab located on a golf course - owner forgot to mention to the bank - construction of a 2000sf addition had begun. Arrive on site - addition was an unfinished shell with roofing and windows only - interior access to the main section of the house had not been done - bare wood framing exterior and interior completed. Owner mentioned he had applied to 3 other lenders for the same type of loan (a cash-out refi to complete the addition) and had been declined 3 times......

suggested he contact the Bank, tell them exactly what the purpose of the loan was and the current status of the addition .......and ask what other loan programs might fit. Told him the Bank would instruct any further action on my part - wished him good luck and left. (billed and paid for time served).

2 weeks later - owner called to thank me for the recommendation - he had indeed been applying for the wrong loan type, had just been approved for a construction loan/refi combo customized loan.

That same day his attorney call me with 3 estate appraisal assignments.

Multiple - Win win scenario for the owner, the lender, the attorney, and the 3 estates - and lil old me.

 

[ABLACKSTON]

Thanks everyone for the info. The loan I am getting is not for a conventional mortgage. They are considering it an investment property since I do not currently live in the home. The bank is aware that the home is not finished, so I won't have any problem there. I'm just worried that since the home is not finished, it will not appraise for the amount I need it to to get the loan! Thanks again!

 

[rcsone]

...it can be done with requirements of "...subject to..."....good luck...........rs