FHA Friday - New Construction

FHA Friday – Appraising New Construction

When completing an assignment in which the FHA appraisal is of a home under construction or proposed construction there are a few things to be considered.

First off the client will provide the appraiser a copy of the executed sales contract (must be signed by both builder/seller and buyer), plans, specifications, and site, dated no more than 30 days prior to the date of appraisal ordering and documents related to the constructions including plans and exhibits that will assist the Appraiser in what is to be built. We don’t always get all this from the Lender but can certainly get this from the Builder easy enough.

In most cases I find the home is already completed or just in need of some cosmetic finishing in the case of more track developments. Custom homes may sometimes request the appraiser to complete a “subject to” appraisal and follow up with subsequent draw inspections for the Lender to have validation of the progress and stages of the construction.

When new construction is less than 90% complete at the time of inspection the Appraiser must document the floor plan, plot plan, and exhibits necessary to determine the size and level of finish. When the new construction is 90% or more complete the Appraiser must document a list of components to be installed or completed after the date of appraisal.

While inspecting/observing the subject home the Appraiser is looking for compliance relating to the Safety, Soundness, and Security of the home. These items are referred to as Minimum Property Standards (MPRs). This cannot be fully completed until the home has utilities operational.

I typically do not find many issues with MPRs on newly built homes. Occasionally there may be some grading needed as water has to be able to run away from the foundation. For more information on these or any other appraisal related questions feel free to give us a call.


Paul Johnson | SunPointVMS

Paul began his real estate career while in college by working as a leasing agent renting out student apartments in the early 90’s. His senior year of college obtained his Realtor License in IL and began working for Coldwell Banker. After working at the Chicago Board of Trade by day and Realtor in the evenings and weekends found greater success in the real estate industry. As a Realtor and experiencing a few canceled closings with no commission turned his attention to the appraisal industry. He obtained his license in 1998 and has not looked back.