New Construction Appraisal in Austin: What Delays Closing
The drywall is up, the appliances are in, and the builder’s sales office has been saying “end of the month” for three weeks. Your lender, meanwhile, is asking for something called a completion report and a copy of the certificate of occupancy. If you are buying a new build around Austin, this is the part of the process nobody explains at the design center. A new construction appraisal follows a different set of rules than a resale appraisal, and those rules, rather than your loan approval, are usually what decide whether you close on the 30th or the 12th of next month.
Key points:
- A new construction appraisal is often completed “subject to completion per plans and specifications,” which means the appraiser has valued a house that does not fully exist yet.
- Fannie Mae requires Form 1004D, the Appraisal Update and/or Completion Report, to confirm the work was finished as described.
- FHA rules turn on the property’s construction status at the time of appraisal, and each status calls for a different set of inspections or a certificate of occupancy.
- Minor unfinished items can sometimes be escrowed. Fannie Mae requires withholding 120% of the estimated cost, caps the work at 10% of the “as completed” appraised value, and allows 180 days from the note date.
- Anything that blocks the occupancy permit cannot be escrowed, so a missing certificate of occupancy stops a closing outright.
Why is a new construction appraisal different from a resale appraisal?
On a resale, the appraiser walks a finished house and reports what it is worth today. On a new build that is still being finished, the appraiser values the home as it will exist once complete, based on the builder’s plans, specifications, and selections. That report carries a condition, commonly written as “subject to completion per plans and specifications,” and the lender cannot fund the loan while that condition is open.
Closing the condition takes a second document. Fannie Mae’s Selling Guide section B4-1.2-05 (effective December 10, 2025) requires Form 1004D, the Appraisal Update and/or Completion Report, when an appraisal contains a “subject to” condition for completion of new or proposed construction per plans and specifications. The appraiser confirms the home was built as described, and the lender clears the condition.
Here is a detail worth knowing if you are watching a calendar: the appraiser does not always have to drive back out. Fannie Mae permits verification through an on-site visual inspection or through alternative methods including “virtual inspections, digital photos, site videos, or other technological solutions.” All completion documentation must include “one or more visually verifiable exhibits.” In practice, a cooperative builder superintendent who sends dated photos the day the punch list closes can save a week over waiting for a second site visit to be scheduled.
What is a certificate of occupancy and why does your lender need one?
A certificate of occupancy, usually shortened to CO, is the document the local building authority issues confirming the home passed final inspection and is legally safe to live in. Lenders need it because it is the cleanest available proof that the house is finished and habitable. Without a CO or an accepted equivalent, most lenders will not fund, regardless of how complete the home looks on a walkthrough.
FHA is the most prescriptive here, and the requirements hinge on the home’s construction status at the time of appraisal. HUD Handbook 4000.1 defines three categories. “Proposed Construction refers to a Property where no concrete or permanent material has been placed.” “Under Construction refers to the period from the first placement of permanent material to 100 percent completion with no Certificate of Occupancy (CO) or equivalent.” “Existing Less than One Year refers to a Property that is 100 percent complete and has been completed less than one year from the date of the issuance of the CO or equivalent. The Property must have never been occupied.”
| Construction status at appraisal | What it means | What an FHA lender must obtain |
|---|---|---|
| Proposed Construction | No concrete or permanent material placed yet | Copies of the building permit and CO, or three inspections (footing, framing, final) on Form HUD-92051, or three inspections by the local authority |
| Under Construction | Permanent material placed, up to 100% complete, no CO yet | Building permit and CO, or a final inspection issued by the local authority or a qualified ICC inspector |
| Existing Less Than One Year | 100% complete, CO issued under a year ago, never occupied | A copy of the CO, or a final inspection issued by the local authority or a qualified ICC inspector |
One wrinkle worth knowing: FHA treats the sale of an occupied property completed less than a year from CO issuance as an existing property, which moves it out of the new construction rules entirely. That matters for builder model homes and for spec homes that were briefly lived in.
Can you close if the house is not quite finished?
Sometimes, yes. Fannie Mae allows a loan to be delivered before certain postponed items are complete, provided those items are part of the sales contract and do not prevent an occupancy permit from being issued. The lender withholds money in escrow until the work is done, which is why you may hear this called a completion escrow or a holdback.
The guardrails are specific. The lender must withhold “funds equal to 120% of the estimated cost” of completing the work, or the full contract price where a guaranteed fixed-price contract exists. The cost of completing the improvements may not exceed “more than 10% of the ‘as completed’ appraised value.” The work must be finished within “180 days of the note date.”
Those rules sort neatly into what can wait and what cannot. Landscaping held up by a summer heat restriction, a deck, a fence, or a driveway apron scheduled behind a concrete crew are the kinds of items that fit. Missing HVAC, no water heater, unfinished electrical, or anything else standing between the builder and the occupancy permit does not fit, because the occupancy permit is the line Fannie Mae draws. If your builder suggests closing around an unfinished item, the first question to ask is whether the city will still issue the CO with that item outstanding.
Four things that actually delay an Austin new build closing
Files rarely slip because of underwriting. They slip because of sequencing. The four below account for most of the delays we see at Mortgage Austin on builder transactions in the Williamson and Hays County communities.
- The CO is issued later than the builder projected. Municipal final inspections get scheduled, failed, and rescheduled. Build a buffer into your contract date rather than into your moving truck date.
- Nobody ordered the 1004D. The completion report is a separate order placed after the home is done. If your lender is waiting on the builder and the builder is waiting on the lender, the file can sit still for days.
- The punch list gets confused with the completion condition. A punch list is between you and the builder. The 1004D and the CO are what the lender needs. Paint touch-ups will not hold up funding. A missing CO will.
- Rate lock and completion date drift apart. Locks are finite, and extensions can carry a cost. If your build timeline is moving, our post on whether builder incentives are worth it covers how lock terms and builder offers interact.
Market timing is part of the calculation too. Unlock MLS and the Austin Board of Realtors reported a Central Texas median sales price of $412,000 in their August 2026 Central Texas Housing Report, released September 15, 2026, down 6.4% year over year, with closed sales down 7.3%. Softer conditions have made builders more willing to negotiate, and the fine print on builder incentives is where that negotiation shows up. For current inventory and price figures, the Austin housing market hub is kept up to date. Buyers shopping the fast-growing communities northeast of Austin can also review local property tax and escrow considerations on our Hutto mortgage page.
Frequently Asked Questions
Do I need a certificate of occupancy to close on a new build?
In nearly all cases, yes. The CO is the local building authority’s confirmation that the home passed final inspection and is safe to occupy, and lenders rely on it as proof the house is finished. FHA rules allow a final inspection from the local authority or a qualified ICC inspector as an equivalent in some situations, but a home with no CO and no accepted equivalent will not fund.
What is Form 1004D and who pays for it?
Form 1004D is the Appraisal Update and/or Completion Report. Fannie Mae requires it when an appraisal was made subject to completion of new construction per plans and specifications. It is typically a modest fee next to the original appraisal, and who pays depends on your contract and your lender, so ask during the disclosure stage rather than the week of closing.
Can the appraiser sign off without coming back to the house?
Often yes. Fannie Mae permits completion verification through an on-site visual inspection or alternative methods including virtual inspections, digital photos, and site videos. The documentation must include at least one visually verifiable exhibit. Asking your builder to send dated completion photos promptly can shorten the gap between the final touches and your funding date.
Can I close if the builder has not finished the landscaping?
Possibly, through a completion escrow. Fannie Mae allows postponed items when they are part of the sales contract and do not prevent an occupancy permit. The lender withholds 120% of the estimated cost of the unfinished work, and the total cost cannot exceed 10% of the “as completed” appraised value. Weather-delayed landscaping is a common example.
How long does the builder have to finish postponed items?
Fannie Mae requires postponed improvements to be completed within 180 days of the note date. The escrowed funds are released once the work is verified as complete. If that deadline looks at risk, raise it with your lender early, because the escrow terms are set at closing and are not easy to renegotiate afterward.
Why did my closing date move after the final walkthrough?
The walkthrough is between you and the builder, and it does not clear the lender’s conditions. Funding usually waits on two separate items: the certificate of occupancy from the city, and the completion report confirming the home was built to the plans the appraisal relied on. Either one arriving late can move the date even when the house looks finished.
New build timelines move, and the fix is usually sequencing rather than paperwork volume. Schedule a discovery call and we will map your builder’s projected completion date against the appraisal condition, the certificate of occupancy, and your lock, so you know which date actually controls your closing. No pressure, no commitment, just clarity.
Anthony Ferrando NMLS# 1919613 | Client Direct Mortgage NMLS# 1065732 | Licensed in Texas. This content is for educational purposes only and does not constitute a commitment to lend. Loan approval is subject to credit, income, and property qualification. Figures shown are illustrative examples, not a quote. Sources: Fannie Mae Selling Guide B4-1.2-05, Requirements for Verifying Completion and Postponed Improvements (effective December 10, 2025); HUD Handbook 4000.1; Unlock MLS and Austin Board of Realtors, August 2026 Central Texas Housing Report (released September 15, 2026).
