How is an Unfinished Home Appraised?

Posted by TSI Appraisal
Can an appraiser make a report on the value of an
unfinished home? In short, yes. To do so, there are two different routes the
appraiser can take: determine an “as-is,” or a “subject to,” appraisal value.
An “as-is” appraisal is fairly common and just as it sounds,
it’s an appraised value for a home in its current condition during the time of
the appraisal. A “subject to” appraisal is an assumed value of a home once all of
its work is completed. This type of appraisal is somewhat common, and will take
place when a house is still under construction or in the middle of a renovation.
To complete a report of this type, the appraiser takes into account all of the
additions that will go into the home, but the value of the home listed in the
report is based on the condition that all construction or renovations are
completely finished.  
It’s like your appraiser is saying, “OK, your house will
be worth this much once you finish your kitchen remodel, so here’s an adjusted
home value for the additional work.” Meaning that the value is only valid once
work is complete on the home.
A subject-to appraisal is allowed for two types of loans:
new construction and government backed rehabilitation loans, where a property
is fixed up and brought back to life. In both cases, a loan can be made for a
home that isn’t in immaculate living condition, under the pretense that work is
done to fix its faults and then the value will improve. This type of appraisal
is great for fixing-up a house, and situations where a home is flipped (purchased,
repaired, remodeled and sold). The projected value can also be verified by the
appraiser during a re-inspection.
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