Home Buying in Albany>Question Details

Rachele, Home Buyer in New Lebanon, NY

new construction appraisal

Asked by Rachele, New Lebanon, NY Tue Feb 10, 2009

We are doing a construction loan with land and wanted to see if we can figure out what it will appraise for before we pay for it. Any tips or suggestions to figure this out would be great.

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Kevin Clancy #1 Voted Realtor’s answer
While the cost approach will be completed it is secondary to the market value approach which considers area sale prices. There is an old saying in the appraisal business " cost doesn't equal value" While the cost approach provides some guidance and is a valuable tool, the sales comparison approach is going to be main indicator. Just because a project costs xxx doesn't mean it is worth that much. The value is determined by area homes sales and prices. I have seen people spend $100,000 in site work to make a site usable that added only a small value to the property. Area home sales prices are readily available online. Costs over runs in new construction are typical. Be sure you aren't over improving the home in comparison to area homes before you put a shovel in the ground.
0 votes Thank Flag Link Sun Feb 15, 2009
A cost approach is done on new construction. You will need to figure the value of the land, using not only your property, but other comparables in the area that have sold within the last 6 months. This assumes that all necessary improvements (ie utilities) have been accomplished and the lot is ready to build on. That will establish the value of the land. Then you will need to figure a cost to construct the home based on the per square foot figure that your builder gives you. If this is not available then you can look at other new construction of the same quality as the home you'd like to build and use that cost per square foot figure. Be sure to use sold prices of other similar homes, not listing prices. Add that to the value of the land and you'll get pretty close to what the bank's appraiser will estimate.
0 votes Thank Flag Link Tue Feb 10, 2009
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