In looking at numerous appraisals in the past, I never saw a higher appraisal or adjustment for better appliances or better cabinets. You might get an upward adjustment for the fireplace if the other homes don't have one--not the materials used necessarily.

You will get an adjustment for being a new house versus what I assume are older houses.

Ok. Thanks! I am clearly clueless when it comes to the appraisal stuff. ;)

It's square footage and location primarily. Finishes don't really add anything to speak of. Maybe 10% tops if the home is clearly a high grade home. But, a high grade home in an area of lower ones is actually penalized rather than getting a higher appraisal. It's about location first. Most higher grade homes appraise for less than they cost to build and people have to end up bringing money to the table to close.

In our area, adjustments are made for higher end materials and location but for a construction loan, we give the appraiser a spec sheet that reflects the materials that will be used and those things are part of the initial appraisal. On final inspection when the home is completed, adjustments are made to reflect any changes.

Around here there are "grades" of finishes. You get more $$ for solid cabinets, wood floors vs. laminate, and better windows. Must depend on the area or perhaps the variety of available products.

I remember my builder telling me about prior clients who borrowed every dime they could to build their new house, and they ended up in a bad spot when the appraisal came in well under what they needed. Apparently they spent a lot on their kitchen and other higher-end finishes - and those finishes didn't appraise for what they cost.

I blame HGTV. :) Too many people have seen those "get 20k in value by doing $5k worth of work" shows. I've rarely seen it work that way in real life.

When we had our initial appraisal done for getting the construction loan, we were very concerned about it. The comps in our area aren't good for a variety of reasons, but the simple explanation is that the new construction of homes similar to ours have not been sold by original owners.

By the bank's rules we couldn't communicate directly with the appraiser, but our builder could. We made sure he had a list of all the customized things we're doing including things we've already purchased in preparation - like hand blown glass pendant lights and a third party energy audit we had done. When we got a copy of the appraisal it included many of the things on our list. I can't say how much it affected the bottom line, but it sure seemed to help. We mostly wanted the appraiser to know it wasn't a cookie cutter house.

My advice would be to do what you can to get that message across. Think of it like marketing your home for selling. If the appraiser is going to do a walk through you could have a printed list in each room of what sets your house apart. We did this once when selling a custom built home. Printed the sheets on colored paper so it was easy to spot in each room. We didn't leave it to the realtors coming through to pick out those features.

Good luck! We know the stress -

Flint2013,

The problem with doing the same as you suggested is that my husband did 90% of the work in the house. He was the General as well as did the majority of the work. The only thing we subbed out the roof, drywall and finishing, electric, and insulation. Everything else from dirt work to concrete foundation to siding to flooring to interior trim/painting.. etc was done by my husband and father in law. He's going to talk to our banker tomorrow about it all. We shall see what is said. We already had an understanding that his labor and the savings from that is our down payment. We won't have to bring money to the table or anything, but I'm still wondering how the final will go. We put finishes in our house that would typically be seen in a larger home, so there are no comps around. I'm just being curious is all.

Its all about the numbers, regardless of what you saved in labor, if the house is worth less in appraisal than it costs then you have to pay to close the loan for the difference. No way around it really as far as I know. I am also terrified of this. No good comps and there is always the possibility of a low appraisal. I officially hate construction loans.

duplicate

This post was edited by MFatt16 on Mon, Dec 2, 13 at 18:11

Labor isn't really a "savings" as far as an appraisal goes. If the house cost you 500K to build because you put in a lot of fancy finishes, and the home is in an area of 300K houses, that location will have more input into the price than the finishes will have. You're not going to get a 500K appraisal. You'll be stunningly lucky to get a 400K appraisal. It's always a penalty to be the largest or nicest house in any neighborhood.

Now, if the home cost you 500K to build, and it's in an area with 700K homes, and you are at their same level as far as size and finish goes, that's when you can see the appraisal come back for more than it cost you to build. However, locations like that are usually more expensive to get into on the front end and have neighborhood controls that would probably eliminate most people from building their own home there.

We're okay when it comes to "down payment" being labor. The lender only allowed us 80% of the initial appraisal to use. We're within those means. We'll be finished within the next week or two. The final appraisal should be higher than the initial because we made changes that were not listed on the originial appraisal that will increase the value, and I'm not referring to the finishes.

Also, as far as location. We're within 1/4 of a mile of a 500+ acre recreational/fishing lake. We fall under the lake's zoning bylaws, and we were within them. Our home is not the smallest nor the largest. There are many much larger beautiful homes in the area and on the lake. We're located in TN, so the area is beautiful. ;) So like I said, our home is located in a much nicer area than the comps in the nearby town.

I understand what you're saying about doing work yourselves. We actually are, too, but not as much as you have done.

I'd still want to make a call out list of what makes the house special. Concise - easy to read. Have been through so many appraisals that had big things wrong.
Couldn't you just have this innocently on the kitchen counter?!