How do appraisals work for new construction

There are three reasons why new homes cost more than existing homes. Appraisals for new construction are based on comparing the proposed new home to recently sold homes similar in size and features. Since most sales are from existing stock, appraisals for new homes are often less than the cost to build them.

Buyers pay most of the costs associated with closing on a home because so many of the costs are tied to the mortgage process.

Origination fees, appraisal fees, prepaid items, and more — all of these are required by the lender and therefore become the obligation of the buyer. 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.

If the loan closes you may receive the money back, or applied towards your loan. There are three location categories: urban, suburban or rural setting. This will determine how far away the comps can be. In an urban setting, comps must be a half mile or less from the construction location.

For suburban properties, most comps are found within 3 miles of your lot. Rural properties, require comps to be within 10 miles. For example, you are trying to build a log cabin in the middle of a city. There may be no other log cabins in the neighboring community and it may be deemed too risky for the bank to loan you money to build such a home.

Another example could be if you are trying to build a home on a very large piece of land. If this happens, try searching for another lender or working with the lender to understand what you could do differently to make lending you money less risky for them.

It always comes back to the comps. Overbuilding is when you design a home that is much larger and more extravagant than the neighboring homes. Make sure you consider the size of the home and the neighborhood.

You could also tone down the selections to meet the neighborhood. You can always build your house as you see fit, but just know that others may not value these details as you did during resale.

You could chose to try again with a new lender and apply for a second appraisal. This option is risky because most likely the new appraisal is not going to be very different. If there is a glaring mistake in the appraisal like they have the number of bedrooms incorrect, or the wrong lot size, you can request the appraisal be adjusted with correct information.

If the appraisal came back lower than the nearby comps you could choose to update your designs. They have to calculate the total gross living area of a home. If you have been out of town for the last couple of weeks and your house is a mess, then relax. Appraisers will pay the most attention to a home's size, exterior, and interior. What increases the value of your home appraisal? Create curb appeal. Make your home picture-perfect. Stage inside and out.

Add that wow factor. Make updates that pay off. Invest in low-cost projects that increase value. Keep track of improvements. Take before and after photos.

Learn what buyers want. See how it compares. Can seller back out if appraisal is high? A home that appraises for higher than the purchase price is a benefit to buyers as it means instant equity.

Its impact on sellers is subject to how motivated they are. Once all of the information has been evaluated, the evaluator can then offer the estimated valuation for the new construction property. While the house may sell for slightly higher or lower, the value is a fair estimate of the range the house may earn on the market. The property may have amenities that drive the price higher than what is originally estimated. This value also gives the lender important information about how much money they can reasonably loan for the purchase of the home.

In the end, one of our Home Appraising Group experts will work to give you an unbiased valuation of the new home so you can move forward. This is a big step into a new journey.

Building a home can lead to many pitfalls at almost every step of the way. The best way to avoid these problems when it comes to your appraisal is to find the right people to help you sail through the process.

Consider several new construction properties that have sold in one area. One sold and the value reflects the fact that the home had a landscaped backyard with a large pool.