Real Estate

Appraisal Pre-Construction Question

  • Last Updated:
  • May 14th, 2019 9:53 am
[OP]
Deal Guru
Feb 29, 2008
13851 posts
10089 upvotes

Appraisal Pre-Construction Question

I've only bought pre-construction condos and appraisals were quite easy I guess, since there were a load of comps not just in the area, but in the same building. My question is how do appraisers work when we're talking about a house in a new development that doesn't have any accurate comparables? Was talking to a broker who had a client who had an appraisal come in way low and he had to make up the difference.

So, what do appraisers look at if there are no accurate comparables? Do they look as far as 2 blocks or further for comparisons?

What would certain features be worth? For example:

Fireplace - $10,000
10 ft ceilings 20,000
finished basement - 50,000
elevator - 60,000
2 car garage - 10,000
hardwood throuhgout - 15000
4 replies
[OP]
Deal Guru
Feb 29, 2008
13851 posts
10089 upvotes
As I research. Basically, don't go crazy on upgrades. Also seems like some people use appraisal clauses. I don't see that working with builders here.
Deal Addict
Jan 15, 2017
3745 posts
3152 upvotes
Every city has location areas defined. Appraisers will use these areas to find comparables within an acceptable location. It will almost most certainly be more than 2 blocks.

Comparable homes need not be identical. Just comparable to your home in terms of size and features. And, your new home will be comparable to recent resell homes, not recent new home sells as these selling prices are not captured until the homes are sold on the resell market.

It is relatively easy to over improve a new build. Customization and choices can increase the cost without increasing the value. That 60,000 elevator might be difficult to recapture in 1:1 increased value, as may the 50,000 finished basement.
[OP]
Deal Guru
Feb 29, 2008
13851 posts
10089 upvotes
skeet50 wrote: Every city has location areas defined. Appraisers will use these areas to find comparables within an acceptable location. It will almost most certainly be more than 2 blocks.

Comparable homes need not be identical. Just comparable to your home in terms of size and features. And, your new home will be comparable to recent resell homes, not recent new home sells as these selling prices are not captured until the homes are sold on the resell market.

It is relatively easy to over improve a new build. Customization and choices can increase the cost without increasing the value. That 60,000 elevator might be difficult to recapture in 1:1 increased value, as may the 50,000 finished basement.
And that's my fear. There's nothing comparable in the area.
Deal Addict
Jan 15, 2017
3745 posts
3152 upvotes
There most likely will be comparables, unless you are building a very unique custom home.

The appraisal will also add and subtract based on features in your home that are not in the comparables. This will be covered in a separate section.

Your home will also be compared against recent sales, within the previous 6 months. Depending when your home closes, it may be compared with homes that are only closing now.

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