How to Get a New Construction Appraisal for Your Dream Home

Are you planning to build your dream home from scratch? If so, you may need a new construction appraisal to secure a loan from your lender. A new construction appraisal is an assessment of the expected value of your home based on the building plans, specifications, lot, and neighborhood. It also compares your home to similar homes that have sold recently in your area.

We will explain what a new construction appraisal is, why you need it, how it works, and how to get one. We will also answer some frequently asked questions about new construction appraisals.

What is a New Construction Appraisal?

A new construction appraisal is a type of appraisal that is used for homes that are under construction or have not been built yet. Unlike a traditional appraisal, which is based on the current condition and features of the home, a new construction appraisal is based on the future condition and features of the home.

A new construction appraisal is typically ordered by the lender as a form of protection. The lender wants to ensure that the home is worth the amount of the loan and that they are not lending more than the expected value of the home.

A new construction appraisal is usually done by a licensed appraiser who is independent from the lender and the builder. The appraiser will review the building plans, specifications, lot, and neighborhood of the home. They will also look for comparable homes that have sold in the last six months within three miles of the construction site. These are called comps.

The appraiser will use one or more methods to estimate the future market value of the home. They can use a cost approach, which adds up the cost of the land and building materials; a value comparison approach, which compares the home to similar comps; or an income approach, which calculates the rental income potential of the home.

The appraiser will then fill out a Uniform Residential Appraisal Report (URAR) form created by Fannie Mae to document how they estimated the value for the new construction home. The lender will use this report to finalize the loan amount for your mortgage.

Why Do You Need a New Construction Appraisal?

A new construction appraisal is required by most lenders for any construction loan. A construction loan is a short-term loan that covers the cost of building or renovating a home. A construction loan is usually paid in installments or draws as the work progresses.

A new construction appraisal helps the lender determine how much they can lend you based on the expected value of your home after construction. It also helps you avoid overpaying for your home or getting into financial trouble if your home does not appraise as high as you expected.

A new construction appraisal can also benefit you as a buyer by giving you confidence that you are getting a fair deal for your home. It can also help you negotiate with your builder or seller if there are any discrepancies between the appraised value and the contract price.

How Does a New Construction Appraisal Work?

A new construction appraisal works in a similar way as a traditional appraisal, but with some differences. Here are the main steps involved in getting a new construction appraisal:

Contact your lender and apply for a construction loan. Your lender will review your credit score, income, assets, debt, and other factors to determine your eligibility and loan amount.
Choose a builder and finalize your building plans and specifications. You will need to provide your lender with detailed information about your home design, materials, features, lot size, location, and neighborhood.
Your lender will order an appraisal from a licensed appraiser. The appraiser will contact you or your builder to schedule an appointment to inspect your property and review your plans and specs.
The appraiser will conduct an on-site inspection and research comparable sales in your area. They will use one or more methods to estimate the future market value of your home based on its hypothetical condition after construction.
The appraiser will complete an appraisal report and submit it to your lender. The report will include a description of your property, an analysis of the market conditions, an explanation of how they calculated the value, and any adjustments or comments they made.
Your lender will review the appraisal report and adjust your loan amount accordingly. If the appraised value is higher than or equal to the contract price, you can proceed with your loan as planned. If the appraised value is lower than the contract price, you may need to renegotiate with your builder or seller, pay more out of pocket, or cancel the deal.

Frequently Asked Questions (FAQs)

How much does a new construction appraisal cost?

A new construction appraisal will typically cost between $300 and $800. Factors impacting cost include the area you live, the size of the home and area that needs appraised, and the current demand for appraisals. Your lender may request a deposit to be paid towards the appraisal.

How long does a new construction appraisal take?

A new construction appraisal can take anywhere from a few days to a few weeks, depending on the availability of the appraiser, the complexity of the project, and the turnaround time of the lender. You can speed up the process by providing all the necessary information and documents to the appraiser as soon as possible.

What if my new construction appraisal comes in low?

If your new construction appraisal comes in lower than the contract price, you have a few options:

You can renegotiate with your builder or seller to lower the price or make some concessions.
You can pay more out of pocket to cover the difference between the appraised value and the loan amount.
You can cancel the deal and look for another property or builder.
You can request a second opinion or appeal from another appraiser or lender.

What if my new construction appraisal comes in high?

If your new construction appraisal comes in higher than the contract price, you have a few advantages:

You can enjoy instant equity in your home, which means you own more of it than you owe.
You can qualify for a lower interest rate or better loan terms from your lender.
You can increase your resale value or refinancing potential in the future.

How can I increase my new construction appraisal value?

There are some things you can do to increase your new construction appraisal value, such as:

Choosing a desirable lot, location, and neighborhood for your home.
Choosing a high-quality builder who can deliver a well-designed and well-built home.
Choosing materials, features, and finishes that are durable, functional, and appealing.
Choosing upgrades that add value, comfort, and efficiency to your home.
Choosing comps that are similar, recent, and nearby to your home.

Conclusion

A new construction appraisal is an important part of getting a construction loan for your dream home. It helps you and your lender determine how much your home is worth based on its future condition and features. It also helps you avoid overpaying or underpaying for your home.

To get a new construction appraisal, you need to choose a reputable lender, a qualified builder, and a licensed appraiser. You also need to provide them with detailed information about your property, plans, specs, contract, and comps. You also need to review the appraisal report carefully and take action if needed.

If you need help with getting a new construction appraisal or any other aspect of building or buying a home, we at Residential Appraisal and Valuation Services are here for you. We are a team of experienced and certified appraisers who can provide you with accurate and reliable appraisals for any type of property. We also offer consulting, review, litigation support, and expert witness services.

We are based in Boston, MA but we serve clients nationwide. We have access to the latest data sources, technology, and market trends. We follow the highest standards of ethics, professionalism, and customer service.

You can contact us today at +1617-910-3700 or visit our website at www.residentialavs.com to learn more about our services and how we can help you achieve your real estate goals. We look forward to hearing from you soon!

We would love to work with you.