New Construction Upgrades Appraisal

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  • #69785
    lveal24
    Member

    I am at the bank application stage and are set to go the design center for a new construction home we are buying. I am little nervous about the appraisal process since the NACA handbook states “Purchase price not to exceed the appraised value“.

    I really would just like to pay for any upgrades in cash so it doesn’t effect my loan amount. Does NACA allow that? I don’t want to add any upgrades into the loan.

    #69788
    DeeCee
    Member

    We did that with new construction and NACA in 2017, but things might have changed since then. It caused lots of paperwork issues! No one could figure out the loan amount was different from the purchase price. It ended up working though. Good luck.

    #69794
    jgamble8
    Participant

    Your purchase price will still be the price including the upgrades— they do not adjust your purchase price because you are paying cash for upgrades. It’s best this way to keep up the value throughout the neighborhood. It’s your loan amount that will differ. I’m doing the same thing. You won’t have any problems.

    #69795
    lveal24
    Member

    @jgamble8 so your saying your purchase price included the upgrades but the actual loan amount was different because you paid cash for the upgrades? Does the appraisal have to equal the purchase price or the loan amount?

    #69797
    Nelsont
    Member

    The appraisal has to be equal to or higher than the loan amount. It’s a symbol of a good deal. If you think of the appraisal as the MSRP and the loan as the amount it will cost bank of America to buy the house then as long as they don’t have to pay over “sticker price” then you should be good.

    #69801
    lveal24
    Member

    Ok that makes sense. I wonder if I will have to add the funds to the escrow Account To pay in cash or maybe a principle reduction? I guess I will find out soon. Just hope everything goes well with the appraisal

    #69855
    jgamble8
    Participant

    @Iveal24- yes, correct. My loan amount is less than the purchase price because I’ve paid some cash for upgrades. My first appraisal (when it was just land) was only $1,000 more than the purchase price. I received an updated appraisal and it has increased by about $9,000. I’m sure at closing, once the appraiser is able to physically see the upgrades, it will be appraised at an even higher amount than my purchase price and loan amount. Hence, the reason I say you more than likely won’t have any problems.

    #69858
    TTrumble
    Member

    Hello lveal24,

    The only thing I’ll add to this is that most (but not all) upgrades add more value to the home than the actual cost of the upgrade. This is why jgamble8 is anticipating the final appraisal to be even higher than the price or mortgage amount.

    Tim Trumble
    Online Operations, NACA
    ttrumble@naca.com

    #70503
    lveal24
    Member

    **update***

    The first appraisal came back short. It seems it was short because the appraiser didn’t use the correct purchase contract with the updated addendum reflecting the upgrades and solar panels.

    So now we have to go through the appraisal dispute process which sucks! I guess we will get another appraisal when the home is built but I’m just a bit nervous now because my web file says “Lender Status: Underwriting-2nd Opportunity”.

    Also one of my Lender conditions is asking for COC documentation Which I’m not exactly sure what that means but I guess I will find out soon. Fingers crossed

    #70505
    jgamble8
    Participant

    @iveal24 -CoC is ‘change of circumstances’ is what NACA submits to the bank anytime something changes in your purchase agreement. Sounds like you had a contract addendum so that would have to be submitted to BoA by NaCa being that your purchase price has changed since it was originally submitted.

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