Construction Appraisals for New Build Projects
Quick Answer
Construction appraisals for new builds typically include three valuations: lot value (as-is), cost approach (land + construction costs), and completed value (comparable sales of similar finished homes). The completed value drives loan sizing.
Table of Contents
Three Values in a Construction Appraisal
1. Lot Value (As-Is)
The current market value of the land before construction begins. This is important because lot equity often counts toward the borrower's required equity contribution.
2. Cost Approach
The cost approach estimates value by adding:
- Land value
- Construction costs (hard and soft)
- Entrepreneurial profit
This approach validates whether the construction budget is reasonable relative to the finished product.
3. Completed Value (Sales Comparison)
The estimated value of the home after construction is complete, based on comparable sales of similar recently sold homes. This is the value that drives loan sizing.
The appraiser looks for comparables that are:
- Similar in size, style, and quality
- Located in the same market area
- Recently sold (within 6-12 months)
- Preferably new construction
What Appraisers Review
Plans and Specifications
- Architectural drawings and floor plans
- Material specifications and finish levels
- Square footage calculations
- Number of bedrooms, bathrooms, and garage spaces
- Special features (basement, pool, outdoor living)
Site Information
- Lot size and topography
- Utility availability
- Zoning and land use
- Flood zone status
- Access and road frontage
Market Data
- Recent sales of comparable homes
- Active listings and competition
- Market trends and absorption rates
- New construction activity in the area
Supporting a Strong Appraisal
- Provide detailed plans: Complete architectural drawings with dimensions
- Specify materials: Brand names and quality levels for finishes
- Submit comparable sales: Share your own research on relevant comps
- Include a detailed budget: Shows the appraiser the scope of construction
- Highlight unique features: Anything that adds value above standard construction
- Meet the appraiser: Walk the site and discuss the project in person
Related Reading
Key Takeaways
- ✓Completed value is the primary driver of construction loan sizing
- ✓Provide detailed plans and specifications to the appraiser
- ✓Comparable new builds produce the strongest appraisals
- ✓Conservative appraisals may require additional borrower equity