All the best,
Century 21 Tenace
I would recommend contacting an appraiser now. Doing so will give you a very good idea of the future value. Also, this appraiser can provide you with comparables, facts, formulas to arrive at the figure and you can use these stats when the bank sends there appraiser
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You are getting some great advice on here. You should determine the total dollars you are going to spending. I just recently had this conversation with a friend of mine in California. My friend bough a single family home, got the architectural plans for changes, renovated the entire house. When it came time to refinance into one loan he had to pay out of his pocket an additional 15k. The Realtor he was working with did not do a good market analysis of his area as far as I was concern.
A good market analysis of the neighborhood should get you close to the number you need.
Best of Luck,
Manuel Brown, Broker
If what you are asking is about a construction loan, there are non-FHA construction loans. They are not your typical mortgage. The construction loan will pay off your existing mortgage. The bank usually arranges for payouts as the work is completed. It very important you find the right place to get your loan. Base on my experience, you will need a substantial portion of the total cost in upfront out-of-your-pocket money.
As for the appraisal, Bradley and Bill are right, one appraiser will establish a present market value and a future market value basis on your plans and neighborhood. A good Realtor should be able to give you a good idea of both.
It is a lot of work, headaches and even heartache to do this kind of renovation. But if everything works out you will have your dream house. Good luck.
BTW, was Grand Jury duty interesting or really boring?
there is nothing wrong with discussing with the appraiser what is intended costs and so forth.
However, please refrain from projecting what you think is the market value. That causes big problems.
I would look for an appraisal that contains at least a sales and cost approach unless this is an income producing building for residential that could have as few as two units.
Although single family could use an income approach depending upon area and available data.
to answer your question about can appraisers bring in values way different from your plans for renovating the answer is yes. Since the market may not support your improvements that could be over improvements or this market may not be ready for development at this time.
The appraiser could be your best friend in avoiding an investment that will not produce. Since the key would be what is the risk of this not generating what is needed for the market to support. And that means the market not an individual value in use that is considered, yet is not the overall factor.
What kind of mortgage are you using to secure the renovation funds? There are only 2 options available that are first mortgages that include funds to renovate: the FHA 203k and Fannie Mae HomeStyle. The most common is the FHA 203k. In either case, the lender hires the appraiser and there is only one appraisal done. The appraiser establishes an 'as-is' value and an after-completed value based on a detailed plan of all you plan on doing. (With the FHA 203k, you must hire an independent FHA plan consultant.)
You can visit my website for more information on the FHA 203k: http://www.203kloanschicago.com
I encourage you to be sure your lender is very familiar with either loan program.
Senior Loan Originator
One Mortgage, Inc.
NMLS #: 222407
After the home is completed your lender will send the Appraiser out to appraise the value. You will be able to borrow money up to a certain Loan to Value ratio based on this appraised value.
Have your Realtor (do you have one?) provide a Market Analysis of what Updated Homes (like the one you are building) are worth.
If for example values in your neighborhood for higher end homes are $500k but you need an appraised value of $700k in order to cover your financing, then you may have some problems.