Appraisals are often a mystery. And since they are such a critical piece of the lending puzzle, people have questions. here are some of the more common ones we get:
Can I order my own appraisal?
Thanks to the Housing Valuation Code of Conduct (HVCC), we can no longer place an order with an appraiser we trust and like. We must use an appraisal management company (also called an AMC) and they choose an appraiser for us. This is meant to eliminate coercion and subjectivity from the process and create a streamlined way to get information on the value of your property. AMC’s have gotten much better at only working with competent appraisers, so for the most part, we get good reports back.
Why is it taking so long?
Truth in lending laws now require us to wait 4 days before we can collect a fee for an appraisal. There are shortcuts we can take, but this slows down our ability to order quickly. Most lenders are extremely concerned with collateral, so they are going to scrutinize your appraisal before they release the report to us. This means it could sit in line for a QC review for days. We do our best to speed things along so we know what value we are working with. As soon as your appraisal is completed, either the lender or K&H will send it along to you.
Where do appraisers get their information?
A lot of places. When looking up comparable sales to your home, an appraiser can access the Multiple Listing Service that realtors use, public records, databases like Realist and CoreLogic, and on refinances, they talk with you. Their job is finding sales that are as similar as possible to the one you are buying or refinancing. So you might think the house down the street is the perfect comparable, but it could be too big or small, have a different bedroom and bath count, or have a host of other features that disqualify it from being used. We hear a lot of people say things like, "The house just down the street sold" or "My neighbor just refinanced his house without any issues" and the reality is, our memories can re-write history a bit. That house that "just sold" was 18 months ago and wouldn't be considered a comparable sale. And the neighbor's refinance was a streamlined loan which required no appraisal.
Do I need to fix things the appraiser mentioned and photographed?
Most of the time, yes. These are "deferred maintenance" issues and they need to be repaired and then re-inspected by the appraiser. They affect the value and marketability of the property, so your lender will often want these things fixed before they’ll let you close. If you’re buying a home, this is extremely important to know because in many cases, the seller can’t or won’t make these improvements, so you may have to. Never good.
If my value comes in low, can I dispute it?
In a past survey done by Zillow, over two-thirds of the people asked still feel the value of their home is higher than it actually is. It’s human nature. We think of what the house was worth last time we got it appraised 6 years ago and have a difficult time letting go. The reality is that comparable sales must be within 3 months and one mile of the subject property to be considered. And yes, this includes short sales and bank-owned properties. But appraisers do make mistakes and every lender has a dispute process that we can use if we have a solid case.