Appraisals

The mortgage crisis in 2008 had a massive impact not only on the lending industry, but on the appraisal industry as well. Appraisers were blamed for inflating home prices, and lenders were blamed for influencing appraisers. Although this wasn’t the sole reason for the mortgage crisis, it certainly contributed. And because of it, strict laws and oversight have been put in place in an attempt to prevent it from happening again. Consequently, an appraiser is going to be very cautious about appraising a home for much more than the purchase price; they are far more likely to provide a comparative value for a refinance.

In addition to the appraiser being carefully monitored, the loan officers have been essentially cut off from the appraiser. Instead, we have to go through the lender’s Appraisal Management Company (AMC) who then communicates directly with the appraiser. To put it simply, I am virtually blind to the appraisal process. Some AMCs are good about providing updates about scheduled inspections and due dates; others, not so much. I typically get the appraisal the same time as the borrower. I don’t even know when the actual appraisal takes place unless I’m notified by the AMC which almost never happens. Real estate agents will know before me because the appraiser often calls them to set up the inspection date. So to some degree it always kills me when an agent asks me for when the appraisal is scheduled because I was just going to ask them the same thing. I know this sounds crazy, but it’s true. I’m sitting on the sidelines twiddling my thumbs until it comes in. Now, if it is taking longer than it should, I can hit up the AMC for an update and they’ll in turn send a request to the appraiser for an update. It’s kind of silly, adds a middle man, and no doubt increases the cost of the appraisal, but I grudgingly understand why we are where we are. As a general rule, appraisals in the summertime are going to take longer than in the winter simply because appraisers are busier.

VA appraisals are ordered through the VA and they have 20 days to complete it. If the market doesn’t support 20 days because they are so busy (like Colorado Springs) you end up in a queue for your appraisal request to be accepted, and then the 20 days starts. To combat this in Colorado Springs, we have an excellent government lender whose AMC will put a rush on the appraisal for a nominal fee and we can get it back in a couple weeks. In places like Fort Knox, I get VA appraisals back in about a week sometimes. It really all depends on where in the country you live and what time of year it is. But a VA appraiser provides us zero visibility to their process–and then one day the appraisal shows up.

Government appraisals (FHA, VA, USDA) are infamous for coming back “subject to” completion of repairs because in addition to determining the value of the home, the appraiser must inspect the home following strict guidelines. Most of the time they want a hand rail put on steps or peeling paint needs to be repainted. Whenever this happens, the borrower has to pay for a completion report where the appraiser goes back out to the property to observe and take pictures of the completed repairs. This completion report normally runs around $175 and there’s nothing we can do about it. Without that completion report, the appraisal is incomplete and the loan can’t close. The appraisers aren’t being mean or messing with anyone, they are simply following a government inspection guideline. For more details, this is what they are looking for with FHA Loans during an appraisal: FHA Appraisal Inspection Checklist.

Appraisal FAQs

This completely depends on what type of loan it is, what lender you are going through, and where you live. VA loans are $425, FHA loans tend to run between $475-$550, and conventional loans can be anywhere from $475-$900.

On average they come back in a couple weeks, sometimes faster if we’re lucky. During peak volume times like the summer, your appraisal will often take longer. There are places in MN and CO that can take nearly 30 days. These are exceptions, but we never know until we order the appraisal which is why we like to do so as soon as possible. If you live in rural areas, your appraisal can take longer as well. Rural areas typically do not  have a strong bank of appraisers to choose from. We are more or less at their mercy, unfortunately.

We need to order the appraisal as soon as possible and this form allows us to do so the second we get the green light. An appraisal is paid outside of closing, or “POC”. Appraisers have to be paid up front to do their work whereas lenders and brokers only get paid if the loan closes.

No. The appraisal is absolutely a third party fee.

No. Congratulations on your instant equity, but a lender will lend based upon the sales price or the appraised value, whichever is lower.

Either the seller lowers the sales price to the appraised value, or you have to bring the difference between the sale price and the appraised value on top of your down payment because the lender will only lend on the appraised value if it’s lower than the sales price.

In extremely rural areas, appraisers are authorized to charge extra money to compensate them for the time and distance they have to travel. We don’t know until the AMC tells us they need to charge the additional fee. Nothing we can do about it, and it truly stinks to call a borrower and let them know we need to charge an additional fee to their credit card. I’ve only had to make that call three times, so it doesn’t happen often, but it does happen.

The appraisal came back “subject to completion” meaning repairs had to be made and the seller needs to make them. Unfortunately, it also means the appraiser needs to go back out and verify the repairs are complete so they can fill out a “completion report” and close out the appraisal.

We recommend ordering the appraisal right away because the initial inspection is what takes the longest and there is no guarantee when the appraiser can get out there. Waiting until the construction is complete will put your closing date in jeopardy if the appraisers are booked and can’t make it out for a while. If you order the appraisal right away, they can do the appraisal “subject to completion” and once all construction is done we will order the completion report. Most of the time they can complete this in one to two days because the hard work is done and all they have to do is verify the work is complete and take a few pictures. This does make you incur the additional trip fee, but it’s worth it to ensure the appraisal doesn’t cause issues with your closing date.