What is a “Subject To” appraisal, and how can it save me money?

The “Subject To” appraisal is one that many people do not understand, so I thought I would share with you today a situation in which a “Subject To” appraisal could have saved the homeowner thousands of dollars. A “Subject To” appraisal is one in which the value is based on a what a home will be worth after an improvement has been made. Some may be familiar with this in terms of an investment property where a home is purchased, improvements are made, and then the property is resold.Today however I wanted to discuss the scenario where a homeowner wants to make home improvements but they want to make sure they are not “over improving” their home for the neighborhood.

An over improvement would occur if the amount of money you spent was not recouped if you sold the home, or if you home-improvement-loan-432built something that was not typical for the neighborhood or larger than acceptable. Examples that come to mind might be a swimming pool, workshop, or enclosed porch. I am well aware that people can build want they want and it can be invaluable to them, however what I am discussing is how these proposed improvements add value when compared to other properties in the nearby area.

A “Subject To” appraisal would take the proposed improvements and determine what the property would be worth after they are made. Lets say you want to build an in-ground pool and the cost to do this $25,000. The appraisal would consists of determining the value of the home with the pool by comparing it to what other homes with pools have sold for. An appraisal of the proposed improvements might reveal that the home, with a pool, would be worth $150,000.  If the home without the pool was worth $135,000, then the contributory value of the pool would be $15,000, meaning that home buyers within this market area would pay and extra $15,000 for a home with a pool. If you compare the contributory value of the pool at $15,000 against the cost of $25,000 to build it, you will see that a pool would not be a good investment. This is why a “Subject To”  appraisal is so important. By getting the appraisal you could potentially save yourself thousands of dollars. It can help you make a more informed decision. You may find that scaling the pool back to a smaller size, or not getting extra features may put the cost in a more reasonable range where the investment would be more acceptable.

Appraisals are not solely used for mortgage loans such as refinances or purchases. They can be used to make decisions about what type of improvements will bring the most return. Many homeowners these days are choosing to fix up and add to their current home rather than sell and buy another one. A “Subject To” appraisal becomes even more important to them, because they would not want to overbuild only to find out in a couple of years, when they are ready to sell, that their $50,000 investment will only add $25,000 to the value of their home. Do you have any questions about this type of appraisal? Leave me a comment below and I would be glad to answer it for you.

If you have any real estate appraisal related questions you can call me at 205.243.9304, email me, or connect with me on Facebook., Twitter, or Youtube.


  1. Tyler Evans says

    Just purchased an investment property and the comps are strong in the area. The home hasn’t been updated since the 70s interior wise I would like to get a subject to appraisal to get the value of the home pre the renovations being made. I want to make sure I do not over-renovate but also want to make sure I extract strong value. Where do I go to get a subject – to appraisal?

    • Tyler, thanks for the question. I would see if I could get a referral from someone where the house is located. If you know any real estate agents or bankers they may be able to pass along a name of an appraiser they know. You could also Google appraisers in your area. Good luck!

  2. We’re trying to buy a house, appraiser made a “subject to” appraisal. Lender is refusing to grant the conventional loan unless repairs are made. Seller is selling “as is”. It’s crazy for lender (large bank) to think I will pay for 10k repairs on a house i don’t yet own. Also, appraisal states no immediate repairs noted that would make the home inhabitable. I’ve got the money for the repairs just not willing to invest until house is under my name… what are my options?? Go with another lender? Can I ask the appraiser to give an “as is” appraisal? Thanks!

    • An as-is appraisal would be an option if the lender will agree to it. That way, they can see that the home is worth what they are lending on it in its as-is condition (if it truly is). The only other option I can think of is to get a purchase and repair loan where the bank would lend the money to buy the home and repair it. They would probably require draws to be made to make the loan but it would assure them that the home would be in good condition. They want to make sure that their collateral is worth the loan amount should the loan go bad.

  3. So, in that case, if it is subject to, than lender may demand 1004d revised inspection report? In subject to, it becomes mandatory or lender can ignore 1004d.

  4. Larry Fenimore says

    Subject to appraisals would also pertain to inspections of the subject property for major components of the house defective questionable items. Is this case can you elaborate on this type of appraisal and the purpose of this type of report
    Would serve?

    • Larry, could you elaborate a little more? I don’t understand what you are asking.

      • Amalia M Harris says

        His question sounds more like an inspection than appraisal. We hired an instructor to do a “seller’s” inspection when we were wavering between moving or renovating. The inspection report gave us the things to prioritize which are often not on the radar for renovations. We needed some electrical work, tuck pointing and chimney cap, new gutters… not the type of jobs to get all creative on and exit about. But, money well-spent.

        • Thanks, Amalia, for sharing. You are exactly right. These types of improvements while not adding extra value still need to be done so that the market value of your home is maintained.

  5. Patricia Andrews says

    Thank you – this answered my question. I’m looking at a home that’s under renovation, incomplete but livable, and was wondering if I can get a mortgage on it. I don’t need financing for the remaining renovations, I just need the mortgage so I can buy it. From your articles I understand the answer is yes. Thank you!

  6. We are planning a whole house remodel of an older home (1890). Since it needs a lot of work, and we were going to do a cash-out refi, will the appraiser call for us to do a lot of repairs before the loan can go through? House is sound, liveable. Also, do they look at outbuildings–garage, carports?

    • It depends on the type of loan you get. A repair and renovation type loan may require you to provide the appraiser with detailed information about what you will be doing to the house. This would include floor plans if you will be adding or reconfiguring the home, as well as a list of materials and scope of work. The appraiser will then give a “subject to” value. If the bank is loaning you money on the home in its current condition then it will depend on the type of work it needs. Outbuildings are included in the appraisal if they are permanently affixed to the real estate.

  7. We are under contract with a house that needs renovations. We are going to close on the house as is with a principal mortgage. Then we are looking at getting another loan or line of credit (not sure which) with a “subject to” appraisal. How does this type if loan work? Only certain lenders do this type?

    • Stacey, in my experience when I’ve done appraisals for this type of loan the bank will ask the appraiser to verify that the improvements have been completed at certain points during the renovation so that they can release money to pay for it. I’m sure there are only certain banks that offer this type of loan.


  1. […] impact they will have on your home. Appraisers are able to do what is referred to as a “subject to appraisal” by looking at the scope of work that owners may want to […]

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