Will appraisal value be influenced by a few unifinished renovations?

[Micah Loewen]

We built a home a while ago and are wanting to get it appraised for a cash-out refinance. We've still been doing some work to it so there are some minor "renos" that are not done and not all the rooms are furnished. Will this be an issue for appraisal? Will it affect the value of the appraisal? 

[River Sava]

Hi Micah, 

Depends on the lender / seasoning periods. When did you finish building the home and when are you planning to be done with current renos?

A lot of lenders have a seasoning period of 6 months in order to use appraised value not cost basis. However, some can do as little as 3. Sending you a dm to connect!

[Nate Herndon]

@Micah Loewen there is a chance the property would appraise for the value that you want, but that it would be appraised as 'subject to repairs' as opposed to 'as-is'. Or, if it does appraise 'as-is', but the lender's underwriter determines that there is more deferred maintenance than they will allow for (say $2,500, or something close to that) then that would also be an issue.

Either way, a 'subject to' appraisal and deferred maintenance are both no-go's for a DSCR cash-out refi. If you and I were working on this one to get it refinanced, my recommendation would be to complete the reno before letting an appraiser in the door.

[Micah Loewen]

Ok thanks! Even if the said Reno’s are as small as a few pieces of trim and some missing soffit? 

[Nate Herndon]

@Micah Loewen You may be able to get away with those just fine - doesn't sound terribly expensive. I have also seen escrow holdbacks for cash-out refinances. If a lender wants to see $1,000 worth of work completed, they can hold that in escrow after closing and release those funds after you provide photos of the completed work. I like that compromise since it doesn't delay closing if all else is good-to-go.

Here's a quick example of an appraisal photo that shows no trim in the laundry room. The appraiser made no comment about it as an issue, and it is unlikely that the underwriter would catch something that small either. It just depends on how obvious the repair needs are.

[Jay Hurst]

Quote from @Micah Loewen:

We built a home a while ago and are wanting to get it appraised for a cash-out refinance. We've still been doing some work to it so there are some minor "renos" that are not done and not all the rooms are furnished. Will this be an issue for appraisal? Will it affect the value of the appraisal? 

 It will depend on the appraiser. AS mentioned above the appraisal will mark the report either "as-is" or "subject to".  This is at the appraiser discretion if she/he thinks the repairs needed effects the value in anyway or not. If the appraiser marks the report subject to you will have to fix the noted items before you can close the loan, and then the appraiser will have to go back out to certify the repairs have been completed. and yes, of course, will charge a trip fee to do this. So, you should just finish the work before the site visit is complete to take out that possibility.  

[Alecia Loveless]

@Micah Loewen I recently had an appraisal done on a multi and did receive less value based on some renovations that were still going on. I suspect I lost about $75,000 off the value I was hoping to get because of these renovations.

I wasn’t thrilled with the appraisal company, and felt that they also significantly down played the value of the income on my commercial property.

If possible I would recommend waiting to do the revaluation until you have finished your work.

[Erik Estrada]

This highly depends on the appraiser's opinion. I would suggest getting everything completed before ordering an appraisal for a DSCR loan. Lenders will use an AMC, and that AMC will select a random appraiser to inspect the property. Lately I have seen a lot of value cuts, so also plan on the conservative side. You definitely don't want to be in a situation where your mortgage balance is higher than what the lender will finance you based on the new appraisal