When an appraiser is completing a report for a Fannie Mae Homestyle Renovation loan, he or she will actually go out to the property and walk it in its current condition.
However, before going out to the property, the appraiser will wait until he or she has the bid from the contractor for the renovations that will be made.
The appraiser will then walk the property, with the bid, and
complete the appraisal report with an “As Completed Value” or an “After Repairs Value.” This means that though the appraiser observes the property in its current condition, he or she will also review the proposed renovations, and determine what the value of the home will be AFTER the renovations are complete.
The appraiser will base his report off of the work being done, and the value of other upgraded homes in the community.
Remember this appraisal is an important component because it can affect how much the buyer is able to borrow. On single family homes, lenders can only lend up to 95% of the loan to value, which is limited to the lessor of A) the purchase price of the property + the renovation costs, or B) this “As Completed Value”