What Does an Appraiser Need to Complete a Proposed Construction Assignment?
One of the very specialized types of appraisals, is an appraisal for proposed construction. An appraisal for proposed construction differs very significantly from your every day, run of the mill appraisal.
Probably the most significant issue is, in most cases, the structure being appraised does not even exist. How does an Appraiser figure out what the property is going to be like when it’s not even there?
There are many things that make this type of appraisal very complex, but what I am going to focus on in this blog posting is what are the things that an Appraiser needs in order to complete and accurate and credible appraisal?
The foundation of a good proposed construction appraisal is the information provided to the appraiser. When there is information missing, such as types and quality of finishes and materials, it’s like appraising on the dark, with a blindfold on. The more accurate and complete this information is, the more accurate the appraisal and the corresponding appraised value will be. There is nothing worse, when completing a proposed construction appraisal, than to not have a complete and accurate picture of the structure being appraised.
A complete set of blueprints is a must. This is best used in a digital format. It is very common for an Appraiser to put the floor plan, with the dimensions, for each level, into the appraisal as an exhibit. The elevations are also an excellent exhibit to have in the report. These help the reader or user of the report, visualize what will be built.
COST BREAKDOWN BUDGET
The cost breakdown, or budget, should include all hard and soft costs needed to build the structure.
From the blueprints themselves, all the way through the construction process, to the last bit of landscaping, every item in the property has a cost associated with it. it is important for the Appraiser to have accurate costs on all of these items, including builder profit and contingency. If any of the items are incorrect on the cost breakdown, this can have an impact on how the Appraiser views the overall quality of the structure being built.
Sometimes called the DOM or “Description of Materials”, this document lists all of types and quality of materials. A good Materials list, for example, will not only indicate the type of floors, counters, appliances and other components of construction, but will also detail them in a way that the Appraiser can truly understand the quality of this proposed home that he or she cannot see.
As an example, if the materials list just says stove, is it going to be the stove on the left? Or the one on the right?
The cost difference between these two is about $3,000. And that is just one component of the house! We still have all of the other appliances, floor coverings, plumbing fixtures, electrical fixtures, cabinetry, countertops and a lengthy list of other items to go!
One of the best things is to provide pictures of the actual materials and finishes. this really helps the Appraiser to determine the level of quality for the property when it is complete. The owners having the house built, will often have their final floor coverings, counters, windows, cabinetry, etc already selected. Send pictures of these items from online catalogs for an accurate representation to the Appraiser.
Commonly the things I see left out of a budget and materials list is landscaping and hardscape. Most of the time, the Appraiser is going to be comparing this proposed home to existing comparables in the appraisal, to determine a final value. If the comparables all have landscaping, and the client forgot to budget for that in their project, each of the comparables will have to be adjusted for their superior landscaping, ultimately resulting in a lower appraised value for the subject, as proposed.
Take the time to get the most accurate and most complete information to the Appraiser for your proposed construction appraisal. In the end, the appraisal will be more accurate.
Apple Appraisal, Inc. is a California Appraisal Management Company, providing Appraisal Management Excellence throughout the state.