Appraisals are one of the most misunderstood parts of buying a new construction condo. Many buyers assume the appraisal process works the same way it does for resale properties, but new construction follows a different set of rules and timelines.
Understanding how appraisals work—and when they actually happen—can help buyers plan financing properly and avoid last-minute surprises.
When Appraisals Happen in New Construction
Unlike resale purchases, appraisals for new construction condos do not happen at contract signing.
In most cases, the appraisal occurs near completion, often just weeks before closing. This is because lenders require a substantially complete building and a finished unit to determine value accurately.
For buyers, this means:
- The purchase price may be agreed to years before the appraisal
- Market conditions can change between contract and closing
- Appraisal risk exists closer to delivery, not upfront
How Appraisers Determine Value
Appraisers rely on comparable sales, known as “comps,” to determine value. In new construction, this can be more complex.
Appraisers may look at:
- Closed sales within the same building (if available)
- Sales from similar nearby new construction projects
- Recently completed resale condos in the area
Early phases of a project may have fewer comps, which can make valuations more conservative. As more units close, appraisal accuracy typically improves.
Why Appraisals Can Come in Below Purchase Price
A low appraisal does not necessarily mean the condo is overpriced. It often reflects timing and data availability.
Common reasons include:
- Limited closed sales at the time of appraisal
- Rapid price appreciation during construction
- Market shifts between contract signing and delivery
This is why lenders often require buyers to demonstrate financial flexibility when purchasing new construction.
What Happens If the Appraisal Is Low
If an appraisal comes in below the purchase price, buyers generally have a few options, depending on the contract and lender:
- Increase the cash portion of the purchase
- Adjust loan terms or loan-to-value ratio
- Challenge the appraisal with additional data (if allowed)
Developers are not typically obligated to reduce pricing based on appraisal outcomes.
Financing vs Cash Buyers
Appraisals primarily affect financed buyers.
Cash buyers may still order an appraisal for personal or planning reasons, but they are not bound by lender requirements. This flexibility is one reason some buyers choose to purchase new construction with cash or higher down payments.
Why Appraisals Feel Different in New Construction
In resale transactions, appraisals happen quickly and are tied closely to inspection and negotiation periods.
In new construction:
- The appraisal is one of the final steps
- Pricing was set long before valuation
- Buyers carry market risk over time
This structure is normal, but it requires a longer-term mindset.
How Buyers Can Prepare
While buyers cannot control appraisal outcomes, they can prepare by:
- Understanding loan-to-value requirements early
- Planning for potential cash gaps
- Working with lenders experienced in new construction
Preparation reduces stress when delivery approaches.
The Takeaway
Appraisals in new construction condos are delayed, data-dependent, and shaped by market conditions at delivery—not at contract signing.
Buyers who understand this process ahead of time are better equipped to navigate financing and avoid surprises as closing approaches.