How is the Appraised Value Determined?
Your Lender will request an appraisal of the property in the “as-is” current condition. The appraiser will need a copy of the 203k Specification of Repairs so they can determine the “as-completed” value. This can cause delays in processing your loan which is why you need to get your 203k Inspection completed as soon as possible. You cannot get final loan approval without it! This is a great feature when purchasing distressed property because often these properties need more rehab work than might drive the cost above appraised value. HUD recognizes that in order to stimulate development of these properties, appraisal guidelines need to be more flexible. Therefore the maximum value for your loan can be as much as the purchase price plus repairs up to 110% of the appraised value. While you might think that means you are overspending on a property, part of the thinking is that you will have less maintenance and have a highly improved property in comparison to many of your neighbors.
