Whether you are buying, selling, or refinancing, appraisals impact all home mortgage loans. Lenders order appraisals to protect themselves and the borrower from overpaying. Today, we are discussing a step-by-step guide to the appraisal process, from ordering the appraisal to receiving the final report.
Before you order
Ensuring your house is well-maintained, as well as making necessary repairs, is critical for a smooth and efficient appraisal. Since the appraiser typically values your home as of the date of the inspection, any incomplete renovations, repairs, or deferred maintenance could impact the appraised value. An appraiser marking the report subject to completion or subject to repairs can have unintended consequences like delaying closing or requiring additional inspections. If you’d like to learn more about how to prepare for an appraisal, check out our blog post.
Ordering the appraisal
Once the appraisal is ordered, the mortgage lender works on finding a competent appraiser. The lender will either randomly assign the order to an appraiser on their approved panel or they will contract an appraisal management company (AMC) who will use their own panel. Some lenders use AMCs to further ensure the appraiser has no affiliation with either party. The appraiser will typically reach out within 24 hours of receiving the order. If an appraiser has been assigned and you haven’t heard from them within 48-72 hours, you may need to reach out to your lender for an update.
Scheduling the inspection
When scheduling the inspection with the appraiser, it is best to stay flexible. While every appraiser’s schedule is different, it is advantageous for everyone if the house is inspected as soon as possible to avoid any problems or delays. Some are willing to inspect on the weekend, and others are not. Your appraiser may vary. The inspection typically takes 30-45 minutes as the appraiser will need to take photos of every room, sketch the floor plan, measure the structures, and note any improvements or deferred maintenance. In order to take clear photos, the inspection must occur while there is still light outside. While this time constraint can create complications, it is important to note that you do not need to be present for the inspection. It’s not uncommon for appraisers to use the garage or a lockbox to gain access for inspection.
Inspection time
The inspection is your opportunity to provide any documents you believe may be helpful to the appraiser such as a dated list of recent improvements, plans and specs, plat map, major repairs, or comparable sales. While not required, this information could facilitate the appraisal process. If you decide to leave for the inspection, remember to set out any documents or keys needed for garages or outbuildings. If you decide to stay, make yourself available for questions but avoid being intrusive. It’s best to allow the appraiser room to work.
Now what?
A normal turnaround time for appraisal reports is typically between 1-2 weeks from when it was assigned. During this time, the appraiser will look for a minimum of three comparable sales, analyze market data, and write a report that explains and justifies their opinion of value. While they aren’t perfect, a competent appraisal can provide a good estimate of a home’s market value. Once the report is submitted, it is verified by the lender’s and/or AMC’s underwriters. If you are buying or selling and the appraised value meets or exceeds the contract value, you can look forward to closing day. When the appraised value is less, the buyer will have to pay the difference as the lender will only loan up to the appraised value. The deal may fall through if they are unable to pay.
Appraisal deficiencies
If there is an issue with the report, the borrower can ask for a Reconsideration of Value (ROV). A ROV gives you the opportunity to provide evidence of inadequate comparable selection, errors/omissions, or bias. It is important that ROVs are only used when there is strong evidence of inaccuracies within the report.
Do you still have questions about the appraisal process? Maybe we’ve answered them already! Click here to learn about five common appraisal misconceptions.
How have your experiences with appraisals been? Good? Bad? Let us know down below.