HOW THE VA OTC
APPRAISAL WORKS
Your home doesn't exist yet. Here's how we appraise it.
Appraisal
PLANS AND SPECS APPRAISAL
Unlike a regular home purchase where the appraiser walks through an existing property, a VA OTC construction loan requires a "plans and specifications" appraisal. The appraiser reviews your construction plans, materials list, and builder's contract to determine what the finished home will be worth.
This appraisal happens before construction starts. The VA issues a Notice of Value (NOV) based on the proposed home, not the dirt. The lender will lend up to the lesser of your total costs or the appraised value.
Key Takeaways
- ✓ Appraisal is based on plans + specs, not a walk-through.
- ✓ Completed value drives the VA Notice of Value (NOV).
- ✓ Occurs before construction begins.
- ✓ Lender lends up to the lower of total costs or appraised value.
VA FORM 26-1852
Description of Materials
This is the key document your builder submits. It's a detailed breakdown of every material and specification for your home: foundation type, framing materials, roofing, plumbing fixtures, electrical systems, HVAC, flooring, cabinets, countertops—everything.
The appraiser uses this form to understand exactly what's being built and to compare it to similar homes in your area. The more detailed and accurate this form is, the smoother your appraisal process will be.
Your builder completes this form. Your lender reviews it. The appraiser relies on it. Make sure it's thorough.
WHAT THE APPRAISER EVALUATES
Comparable Sales
Comparable Sales
Recently sold homes in your area with similar size, features, and quality.
Construction Plans
Construction Plans
Square footage, layout, number of bedrooms/bathrooms, architectural style.
Materials & Finishes
Materials & Finishes
Quality of materials specified in Form 26-1852, from foundation to fixtures.
Location & Land
Location & Land
Lot size, location, access to utilities, and neighborhood characteristics.
NOTICE OF VALUE (NOV)
After completing the appraisal, the VA issues a Notice of Value. This document states the appraised value of your proposed home based on the plans and specs.
The lender uses this NOV to determine your maximum loan amount. If your total costs (land + construction) are less than the appraised value, you're good to go. If your costs exceed the appraised value, you'll need to bring the difference as a down payment or adjust your plans.
The NOV is valid for six months. If construction hasn't started within that window, you may need a new appraisal.
The appraisal is ordered after your builder submits complete plans and Form 26-1852 to your lender. The lender reviews everything for completeness, then orders the appraisal.
You can order the appraisal "based on plans and specs" as long as it would reasonably be completed before the foundation is finished. If your project is further along than the foundation, you must wait until construction is complete and order it as "built less than 1 year and never occupied."
Plan for 2–4 weeks for the appraisal process, depending on appraiser availability in your area.
After construction is complete, the VA requires a final inspection. The original appraiser (whenever possible) returns to verify that the home was built according to the approved plans and specs.
This inspection ensures the home meets VA Minimum Property Requirements (MPR) and was constructed as described in Form 26-1852. Any significant deviations must be documented and approved.
Once the final inspection is complete and you have a Certificate of Occupancy, your loan converts from construction to permanent financing. No second appraisal needed.
COMMON ISSUES & HOW TO AVOID THEM
Incomplete Form 26-1852
Work with your builder to ensure every section is filled out completely. Vague descriptions delay the appraisal.
Plans don't match contract price
Make sure your builder's contract price aligns with the scope shown in the plans. Large discrepancies raise red flags.
No comparable sales in the area
If you're building in a rural area or unique property, be prepared for the appraiser to expand the search radius or adjust for differences.
Appraisal comes in low
You can bring cash to cover the gap, adjust your plans to reduce costs, or appeal the appraisal with additional comps.