When appraising a new construction....

[shrubberyvaluation]

I'm an appraisal coordinator, so I'm doing the orders for my company. I don't want to send out an order too early and clog up an appraiser's queue - I've had them yell at me for that before, so I'm in no hurry for a repeat performance. I have a particular one that I'm definitely not ordering right now - closing isn't until December - but it got me wondering so I thought I'd check in with the experts and see what appraisers generally prefer when it comes to receiving orders for homes that aren't finished.

It doesn't make a lick of a difference to me as long as I have the information of what is left to be built.

 

[shrubberyvaluation]

Unfortunately we don't have any time table, which is why I was asking what was kind of the "general rule of thumb" that everyone goes by. I was thinking a month out, myself, but wasn't sure if that was too far out of skew.

So here is my thought process, and y'all can tell me if this would be an acceptable approach:

Discuss with the LO/processor if we need the appraisal done prior to completion for the sake of underwriting (to have it done subject to completion) and if so at what point UW wants that to be completed - which we will then require the builder and/or borrower to inform us of, when the construction reaches that point. At that time, I would be able to order the appraisal, whatever the required completion point is. This would ensure we aren't ordering too soon, and that we have all expectations in hand for the appraiser when the order is made - wasting no one's time.

My lender is starting a new pilot program where we ditch AMCs and order directly with the appraisers, so the working relationship with my appraisers is of utmost importance to me. I'm very dedicated to creating a strong partnership with everyone we work with, but I've just started so I don't have the rapport with them yet to reach out individually and ask them "Hey, how do you wanna do this?" So all the input I receive here on these forums is very much appreciated!!

I just do it when my client wants as long as I have the plans and specs if the house is not complete. If its FHA lenders typically want to wait until its at the point where its down to just the final selections being installed. If there is a paucity of market data doing it later in the process when there might be some homes that settled in the community doesn't hurt.

 

[residentialguy]

Unfortunately we don't have any time table, which is why I was asking what was kind of the "general rule of thumb" that everyone goes by. I was thinking a month out, myself, but wasn't sure if that was too far out of skew.

So here is my thought process, and y'all can tell me if this would be an acceptable approach:

Discuss with the LO/processor if we need the appraisal done prior to completion for the sake of underwriting (to have it done subject to completion) and if so at what point UW wants that to be completed - which we will then require the builder and/or borrower to inform us of, when the construction reaches that point. At that time, I would be able to order the appraisal, whatever the required completion point is. This would ensure we aren't ordering too soon, and that we have all expectations in hand for the appraiser when the order is made - wasting no one's time.

My lender is starting a new pilot program where we ditch AMCs and order directly with the appraisers, so the working relationship with my appraisers is of utmost importance to me. I'm very dedicated to creating a strong partnership with everyone we work with, but I've just started so I don't have the rapport with them yet to reach out individually and ask them "Hey, how do you wanna do this?" So all the input I receive here on these forums is very much appreciated!!

I would think that it would be best to send it out with plans & specs stage. Then all you need is the final. The only thing that might be a deterrent is if the price is on the high side and you want to gamble that the market will go up to help support the price... that is if it continues to go up. The effective date of the appraisal market value is when they originally inspect it.

 

[Terrel L. Shields]

All the "new construction" I do is before the ground is ever seen the spade. It is strictly from plans and specs. Our state law is such that a contractor could race the bank to the courthouse and file a lien before the bank...so banks here normally do not lend on anything that is already begun, otherwise the borrower has to put up other property. I've seen twice when a loan was halted after the borrower jumped the gun and started construction before the loan was made....one of them the borrower didn't even have the property bought and was laying out foundation pads for chicken houses. Killed the deal, the landowner threatened to sue him and another buyer stepped in and bought the land as the seller backed out. You can see the chicken house pads yet from the road unused and grassed over.

 

[TMG]

I do not appraise new construction. Do new cars need an appraisal to get your loan? The only reason they want an appraisal on new construction is to add your E&O insurance to the list of donors they can go after if the buyer defaults.

In my opinion, a builder provided cost breakdown of land, materials, and their profit margin should be sufficient. Kinda like the window stickers new cars have. If the buyer defaults, let the bank go after the builder.

 

[Dublin ohio]

It won't make much difference to most appraisers what stage of construction it is in. As long as they have the necessary plans and/or specs. One thing to keep in mind. The further into the construction process. The less chance there are for major change orders. That increase the contract price to the point that you end up having to do what amounts to a new appraisal. I find that once they are in the drywall stage. You don't get too many changes of note.

 

[Terrel L. Shields]

I do not appraise new construction.

Easiest stuff in the world. I'd do them all day long.

It won't make much difference to most appraisers what stage of construction it is in.

In a non-conforming loan under the Interagency guidelines, then you also have to provide an "as is" value...not good for half built houses.

 

[Mark K]

As long as they have the plans and specs, any competent appraiser should be able to appraise the subject at any point up to and including the date of completion. But any date prior to completion would result in the value being 'subject-to' completion per plans and specs and would likely require a final inspection.

If the OP is dealing with appraisers that are whining about the order date vs. the extent of completion, he should find better appraisers. This is not rocket science.

The timing of the appraisal is the lender's call and they need to base it on the requirements of the specific loan program being used for financing.

 

[sputnam]

Send the appraisal order as soon as you can. Everyone will appreciate the fact that no one has to rush to make sure they meet the closing date. Personally, I prefer doing appraisals from plans and specifications. No measuring. No stomping around on a muddy construction site (had to do that yesterday). Just try to facilitate the appraiser receiving the plans and a full set of specifications for the proposed improvements.

 

[Tom D]

anytime is fine. i try to avoid rainy days if they started. usually a big mud pit around the house.