Appraisals for New & Proposed Residential Construction – Helpful Hints for a Timely Appraisal

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Appraisals for New & Proposed Residential Construction – Helpful Hints for a Timely Appraisal

Valuation Management Group strives to keep its partners informed about best appraisal practices. An often discussed topic is that of residential turn times. Based on 11 years of experience, we know turn times for appraisals for new and proposed construction can be greatly improved if the following information and detail is provided at the time the order is placed. At the very least, the information should be available at the time the order is assigned to an appraiser.

Who Owns the Land? Provide:

  • If the lot is being purchased, a copy of the executed purchase contract.
  • If the lot and home are being purchased as a single transaction (builder), a copy of the executed contract for the lot and the construction.
  • If the lot is owned by the borrower, a copy of the deed and the survey.

What is the Cost of Construction and What Construction Materials Will be Used? Provide:

  • Detailed cost breakdown and Specifications (specs) – Often, the cost breakdown and ‘specs’ are combined in one document. Whether one or separate documents, they should be detailed.
  • The detail provides the appraiser the information they need to clearly understand the type of materials to be used in the construction of the home. From these details, the appraiser is able to select the most appropriate comparable sales of the same quality of construction.
  • Without adequate and accurate details, the value conclusion might not support the transaction.  The following differences in the quality of construction can impact the appraised value:
      • Appliances – Professional Grade vs. Builder Grade
      • Countertops – Granite vs. Solid Surface
      • Flooring – Hardwoods & Tile vs. Laminate & Vinyl
      • Exterior Finish – Brick vs. Vinyl Siding

What is the Square Footage and Design of the Proposed Home? Provide:

  • Plans – At minimum, the plans should include front, rear and side elevations, exterior dimensions and floor plan.

What Kind of Turn Time Can I Expect?

  • It depends on whether the appraiser has all of the necessary documentation and if the documentation provides an adequate level of detail. If an appraiser doesn’t have to wait for or chase the cost breakdown, plans or specs, he/she can generally turn the appraisal around in much the same time frame as an appraisal for an existing home. An exception to this may be if the home is to be built in a rural market with limited new construction sales. The appraiser may have to spend extra time researching the market for sales data.If there are known and recorded sales in your market that were not listed in MLS, provide us the details at the time you place the order so that we can share the sales information with the appraiser.

Valuation Management Group is a national, full service appraisal management service company that manages the appraisal process for community banks, mortgage bankers and credit unions. We offer the full array of commercial and residential appraisal products and services. We take the appraisal process from ordinary to extraordinary.

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