Myth #7 about the FHA 203k: The Appraisal Ignores Renovation Plans

That's a good one to clarify! Unlike a typical appraisal, the FHA 203k appraisal process does take renovation plans into account.



Here's the breakdown:

1. Two Values Considered: The appraiser will determine the property's value "as-is" in its current condition. They will also estimate the market value "as-improved" after the planned renovations are complete.
2. Renovation Plans Scrutinized: The appraiser will carefully review the renovation plans, including contractor bids, architectural specifications, and the work write-up. This ensures the planned improvements are realistic and in line with local market trends.
3. Credibility of Plans Matters: The appraisal will rely heavily on the quality and detail of the renovation plans. Having a HUD-approved consultant involved (especially for Standard 203k loans) can strengthen the credibility of the plans in the appraiser's eyes.

So, the appraisal process recognizes the potential value increase brought about by the renovations. This is crucial to determine the maximum loan amount you can qualify for to cover both the purchase price and the renovation costs.