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Appraisal during renovation

Posted: Mon Oct 27, 2008 2:27 pm
by prairiebox
We went to the bank the other day to refinance our loan, and we were told we'd need to have another appraisal done on the house. Meaning that someone will come in and walk through our half-finished projects, and we'll try to convince them our house is worth the same or more than it was 3 years ago. Except that 3 years ago, even though the house was covered in paneling, outdated carpet, and layers upon layers of wallpaper, there were no gaping holes in the walls, unrefinished floors, and half-sanded woodwork. Will the appraiser be able to look at the living room, the one finished room, and gauge the quality of work we'll have once our other projects are finished? Will our unfinshed projects negatively affect home value? Will they care that we're improving the usability of the closets and making the house better, or will he just see the chaos??

I'm now wondering if we shouldn't just wait a few months until we've had the office walls skimcoated, the upstairs floors refinished, and have all the woodwork back on.

Help, please?

Re: Appraisal during renovation

Posted: Mon Oct 27, 2008 2:36 pm
by utopia13
Any chance of getting an appraiser that is sensitive to old house projects, issues & "love"?? :D

Re: Appraisal during renovation

Posted: Mon Oct 27, 2008 2:47 pm
by Danno
very interested in hearing how this goes. I'm am in a similar boat by the end of summer next year.

Re: Appraisal during renovation

Posted: Mon Oct 27, 2008 4:02 pm
by carol ny
Not all appraisers do things the same way. When we refinanced our house the guy simply came counted windows, door and walked the footage. He NEVER Came inside.
I've had other appraisals done in other states and they came in sat down and asked us a few questions and then walked around the outside and left.

Re: Appraisal during renovation

Posted: Mon Oct 27, 2008 4:23 pm
by moonshadow317
Yes we just got a home equity line of credit done and the bank (a very strict one ) had an appraisal done. We never even saw an appraiser. Yet there were pictures of the house (outside) in our file at the closing.

Karen

Re: Appraisal during renovation

Posted: Mon Oct 27, 2008 6:28 pm
by YinzerMama
When they appraised our house for our home loan the appraiser missed a bathroom and wrote us down as having central air, which we don't. Clearly they're not all exactly detail-oriented...


I would hope that in your case they will review based on a work in progress vs. wanton disrepair. It may not look pretty but there's a big difference. :)

Re: Appraisal during renovation

Posted: Mon Oct 27, 2008 6:41 pm
by justNigel
As has been noted, appraisals seem to vary.

In the run-up to selling my house, I was thinking about fsbo, so got a certified appraiser to come through. Just to be overly clear, he was working for me and only me. He came about 3 weeks before the house hit the market, so there were a few things not done (porch deck paint, for instance), that I said would be done. He seemed very reluctant to take my word for the fact that these would be done. In the end, I sold for 13% more than his number, so part of me thinks that he didn't take the final tweaks into account.

Now, I would imagine that an appraiser beholden to the bank is thinking, "what price do I set this at to ensure a quick sale for the bank?", and would be very concerned that they are looking only at what's in front of them. So, if it was me, I'd stall or try and keep them out of the house...

Good luck,

Nigel

Re: Appraisal during renovation

Posted: Thu Oct 30, 2008 11:26 pm
by sundine2
We just refinanced with equity out on our house through the credit union. Our old loan was 4.875 for 10 yrs and this one was 5.25 for 10 yrs. They did a "drive by" appraisal that came in about the cost of what we bought it 4 yrs ago. Now since we bought we put in central heat/air ( 2 systems), remodeled the bathroom upstairs, new roof, new concrete drive and 3 car extended garage. How disheartening to have it only appraise for what we paid for it originally without all this and after having put over 50 grand into it already. We have 4 lots even. But the good thing is that our taxes won't go up since it stayed the same. Plus we only had to pay for the title search (187.00) and nothing else at the closing. Sweet deal. We checked with our regular mtg holder and their best offer was 6.125 with 1 pt and 2400 in closing costs. No thanks.

So it probably will appraise for less than you bought it for because of the housing crunch.

Teri

Re: Appraisal during renovation

Posted: Fri Oct 31, 2008 10:03 am
by lrkrgrrl
Now, I would imagine that an appraiser beholden to the bank is thinking, "what price do I set this at to ensure a quick sale for the bank?", and would be very concerned that they are looking only at what's in front of them. So, if it was me, I'd stall or try and keep them out of the house...
I work for a financial institution and order appraisals on a regular basis. The expectation is that an appraiser will provide a professional, unbiased assessment of the property's value based on comparisons to recent sales in your area. NOT "to ensure a quick sale for the bank." That is the complete opposite of what a bank wants from an appraiser. Unless your lender is, frankly, crooked. Which is a whole other set of issues.

Stalling or keeping the appraiser out of the house will have one effect: you won't get the loan you want. If the last appraisal was fairly recent, and the bank uses the same appraiser, a drive-by valuation may be used. It is less expensive than a full report.

If your property is under renovation, you should request an "as is" and "as completed" appraisal. You may want to write up a written plan of completed jobs, and planned work. If the loan is for the purpose of financing the completion of renovation work, it is all the more important to specify what work will be completed.

Renovation work carries a certain level of risk. I have seen families undertake renovation work, fall on hard times, and lose their homes, which ended up devalued by uncompleted renovation work. Sure the lender in a case like this will likely take a financial loss, but the loss - financial and emotional- to the family is so much more.

If you are working with an even vaguely responsible and/or regulated lender, they want to ensure that your property has a decent value, that the work being done will be completed in a workman-like, safe, and legal manner, and that the value of the improvements will be in scale with the value of other homes in your neighborhood. The best thing you can do is make sure your work areas are as neat as reasonable, that your tools are organized, dust is swept or vacuumed, and that you have proper permits, particularly for anything governed by health or fire safety codes.

Re: Appraisal during renovation

Posted: Sat Nov 01, 2008 9:47 am
by prairiebox
Melissa - the loan is just a home refinance, not a contructino loan. We have another 2 years before it goes variable rate on us, so we can wait until the office and stairway are finished if necessary. I wouldn't have any problems letting an appraiser in the house. It's painfully obvious that we're doing work, and I think any reasonable person would see that it will increase the home value overall (Of course, the way the walls were papered and paneled before, you couldn't even really tell that they needed work...). We're not doing anything major, just refinishing woodwork and floors, and repairing the plaster. Because we finished the living room last winter, the appraiser will be able to see the quality of work that we do. We'd eventually like to add on to the "back porch" laundry/bathroom/mudroom, but that's in the 10 year plan.

The last appraisal was done by the bank 3 years ago. It would be nice for now if they did a drive-by, since we have made some curb-appeal changes to the landscaping. I'm very curious as to how our home will appraise once we have the entire renovation completed...

Thanks for the advice!