When appraising a new construction....

[Ariba]

Think you're misunderstanding the SOW of a construction loan appraisal. We are just verifying the work has reached a certain benchmark. Not acting as code enforcement. Same as any other appraisal

That is being a project manager and has nothing to do with appraising.

 

[Dublin ohio]

That is being a project manager and has nothing to do with appraising.

So obviously you have never done a draw inspection.

 

[NC Appraising]

When you are appraising a new construction - how far into the process do you wait? Are you looking for 80% completion? 85%? 95%? At what point do you say "Ok, there's enough here I can confidently appraise the property."

What I have learned:


Custom homes with draw inspections always ordered when site is vacant.

This is for tract home subdivisions only:

If it is new project not built out, they will order when the lot is vacant. First several homes in pud.

After they have several pendings to support the values, they will not order them until they are 90% or 100% finished.

Why?

Better chance the appraiser will make value. This is true when building costs and the market is rapidly appreciating. Remember most contracts for new construction are 6-9 months old.

Some of my appraisals have been over $40,000 above contract when they signed the contract 6 months ago.

Remember our values are for the effective date and not when they will be completed...future value.

It's shady (not illegal) , but that is how builders can raise prices so much. They are betting on future prices.

One other thing....interesting rates. Going up or going down? Lock in. You know the rules on that better than I.

My 1 cent worth of advice.

 

[Terrel L. Shields]

Of course, dealing with FNMA or FHA...but the textbooks make it plain. This is a place where the cost approach can be applied and, in my opinion, should be.

And if I have new construction plus lot sales I got 4 pieces of data to extract. The bare lot price, the extracted value of both site and building improvements and with the cost book I can calculate the spread between the cost book and improved value, and from that calculate the EP and contributory value of the site improvements (driveway, landscaping, septic and utilities as applies.)

$330,000 SP
$66,000 lot price
$264,000 - all improvements
$220,000 cost book estimate
$44,000 net to EP & Site
$33,000 - 10% EP for builder
$11,000 - landcaping, utilities, and driveway

 

[Vermonter]

That is being a project manager and has nothing to do with appraising.

Except collecting data....which your appraisal report is based on

 

[Ariba]

So obviously you have never done a draw inspection.

Again, it has nothing to do with appraising a property.

 

[Dublin ohio]

Again, it has nothing to do with appraising a property.

So that would be a no. By the same standard. Doing a 1004d has nothing to do with appraising a property. It may "technically" not be appraising a property. But it is a service many appraisers provide. Also, many times when you accept a construction loan appraisal. You agree to do the draw inspections. You may have a problem with it and that is fine. But draw inspections are easy money to me. Never spend more than 15 minutes on site. Maybe 15-30 min to compile the results and submit. Obviously you also have no idea what a project manager does.

 

[Ariba]

I am glad it is easy money for you. But you will have to agree that you don't have to be an appraiser to do a draw-down inspection? However, you do have to be an appraiser to do a 1004D.

 

[Dublin ohio]

I am glad it is easy money for you. But you will have to agree that you don't have to be an appraiser to do a draw-down inspection? However, you do have to be an appraiser to do a 1004D.

So what. BTW. I never said you had to be an appraiser to do a draw inspection. Just that some appraisers (including myself) do them. Seems like you had a bad experience in the past or just like being confrontational. Either way. Each to his own.

 

[Terrel L. Shields]

But you will have to agree that you don't have to be an appraiser to do a draw-down inspection?

Many banks own loan officers do the inspections. It is meant only to avoid lending money to the builder for more than they have done. The first draw is usually a materials draw. Then foundation/plumbing, then framing/rough in wiring, decking, roof, and then sides and windows. Finally the interior and last is finish plumbing and floor covering, cabinets etc. My bro was a banker and did his own loan inspections.