There weren't any homes I would consider comps in our area, and somehow the appraiser came up with the number we needed.

I would wait until the appraisal comes back before worrying too much about it. But I think you have to borrow less if your house won't appraise for what it costs to build, or change what you're building so that it is something that will appraise for enough.

Bring more money to the table. If you have to cut back on decorative finishes to do so, then do that. But don't skimp on the bones of the home that will be with it for life.

zone4newby that makes me feel a little better. We have about $50,000 saved up for overages and to pay down on the loan, but I am worried there is going to be much more of a major difference. Hopefully we will get the appraisal in the next couple of weeks and I will update after that. Fingers crossed!

We are currently building in a rural area on 16 acres with no real comparables nearby (the appraiser used the closest comparables that he could find). My appraisal came back at roughly 75% of the actual cost to build (appraisal included land and cost to build doesn't). Luckily, that was fine for us.

We had a generous banker when it came to the construction loan. We still had A LOT of overage and had to fork over the difference. When it came time for the appraisal for the mortgage we weren't so fortunate. Had the same circumstances...rural area, no comps. We had another problem too...we built the Don Gardner Vandenberg plan on a hillside and since it is a walkout, half of the house was valued at lower "basement" costs per square foot, even though the finishing materials were of the same grade as the upper level and most of the rooms were not below grade and had full windows and patio doors. Our appraisal came in at 70 percent of what it cost to build. Good Luck!

We had the basement issue too, it didn't count towards "finished square feet". Our 5600 sq foot house was appraised as a 3400 sq foot house. Also, certain choices in finishes can increase the cost of your build by thousands, but not affect the appraisal (we chose metal clad windows instead of vinyl for example).

You basically have to have the cash to make up the difference (and/or an unsecured loan), plus a good 10-20% for unexpected costs.

We are in the same boat. We are building on 5 acres and the area is rural with mostly older homes that are much smaller. Have been talking with the bank for the past several months and they said the appraisals are getting better but you never know.

Have spent alot of time building the budget getting as accurate as possible ... to try and minimize the future overages. Was supposed to turn in permits this week but looks like we are going to switch it around.

The bank wants us to submit for construciton loan first with a conditional on permits being issued. So, if the appraisal comes back at a number that is far off then the permits will never get issued (because I wont submit). That way, I'm only out the cost of an appraisal vs all the upfront fees on the permit.

If this happens, then we will have to delay build until we can save up more money and try again next year (ugh)

It took over a year to build our home (not quite done yet), appraisal came in good at the start of construction (already own the land). Now we're about 100k off as the market in our very rural area is still falling, really didn't anticipate such a discrepancy between the 2. Now we have to pay out more to settle after already paying ~15% in overages.

Hadn't thought of the final appraisal .... would have thought it would be at least the same as the initial as long as you didn't downgrade anything. Have asked the bank what percentage of appraisals differ from the initial to final

Mistman's situation is the one that keeps me up at night. BBVA Compass has a one-time close program that prevents you from going through appraisal twice, if you want to try to find something like that in your area. We're building in an established but transitioning neighborhood with tons of tear downs in which the price per square foot keeps going up, so we should be OK, but I'm probably willing to pay a little more in interest to not have to go through the appraisal process more than once. I'm paranoid.

Mistman our loan officer warned us about that too. He said the first appraisal may be good but when we go to sell the loan to a mortgage company their appraisal may be under and in that case they won't buy the loan. If that happens then we would have to leave our loan with the bank which can only be locked in for 15 years. It will take us about a year to build also. I guess I won't sleep for the next year worrying! We are talking to the appraiser tomorrow so maybe we will luck up and get what we need!

Got a good appraisal today! Our estimate to build is 595 and the bank will let us borrow 585 so I can live with that! That doesn't include the builders cut or closing costs but will use what we got saved up to go towards that. So now we are waiting for all the paperwork to get finalized and for it to stop raining enough for them to finish laying the road for the equipment to get back there. I'm so excited but getting nervous now!

Congrats Holcombe! I'm glad it worked out!

So glad it worked out!

I never knew basements could hurt appraisals so much! That is crazy. We are not building a garage (because we will do a large detached with a MIL down the line) and the lady at the bank told me that garages also don't usually help appraisals, especially detached ones. For re-sale sure, for appraisals, no. On our report, the garage was worth 5K- would have costs way more than that to build one!!

Construction loans are not normally sold by the bank, but held 'in house.'

The only people they have to satisfy are themselves.

Most mortgages are sold into the secondary market.

NOW you have to satisfy Freddie, Fannie, FHA, VA, etc. if you want a 'conforming' loan.