A “subject to” appraisal is a combination of the current value plus improvements detailed in a renovation budget and scope of work to determine a new fair market value (ARV). It is not only based on the cost and scope of improvements it also considers what like homes in the same renovated condition would sell for. It is not always a $1.00 for $1.00 gain on improvements. It may equal less, more, or an equal amount in return.
Yes – we require an appraisal on all lending programs. Renovation and construction financing require a “subject to” appraisal. Long term purchase and refinance require “as is” valuations and a rent comparable analysis to determine fair market rent.