Appraisal Breakdown

A summary of the appraisal process and commonly asked questions
Who performs an appraisal?

Appraisals are performed by individuals who are trained, licensed, and certified appraisers. Each state has its own licensing and certification procedures. Most lenders work with one or more Appraisal Management Companies (AMCs). AMCs are independent companies that perform various administrative functions of the appraisal process, including the selection of an individual appraiser, scheduling the appraisal, and delivering the final report. 

For legal and regulatory reasons, and to keep the appraisal valuation process free from influence, neither AMCs nor appraisers may be affiliated with the lender, broker, real estate agent, or any other party involved in the transaction. The interactions between these parties are also heavily regulated out of concern for improper interference and conflicts of interest. 

When can an appraisal be ordered?
Typically, an appraisal is ordered once a purchase contract is fully executed (signed by both buyer and seller), and the borrower has indicated intent to proceed with a lender. If the property you are buying is a new construction, the appraisal should not be ordered until the construction of the property is substantially complete. A signed “intent to proceed” from the borrower is required since appraisals are facilitated through the lender. 
How does an appraisal get ordered?
Every lender we currently work with uses one or more AMCs. We will order the appraisal directly with the lender and they will choose which AMC to work with. (Unfortunately you will not be able to order an appraisal yourself as the borrower if you wanted to, since the lender will not be able to accept this document for the loan).
What information is required to order an appraisal?
  • Full property address.
  • Full name of the applicant(s).
  • Anticipated closing date of the transaction.
  • Transaction type (e.g. purchase or refinance).
  • Indication of new construction.
  • Other details about the property.
  • Contact information (such as for; listing agents, selling agents, sellers, builders etc).
  • Fully executed purchase contract + any and all addendums showing final purchase price.
Who pays for the appraisal and how much will it cost? 
As the borrower, you will pay for the appraisal. Once we have locked your rate and sent initial disclosures through the lender, you will receive an email from us asking you to complete a credit card authorization form which will also include the expected appraisal fee. This fee is an estimate. The fee for the appraisal that you end up paying may be higher or lower than the fee included on both your loan estimate and credit card authorization form. The appraisal fee is non-refundable and in most cases, will range anywhere from $500 to $800 but might end up costing more depending on the location, property size, and scope of work. This order will not be placed or charged until you have signed the initial disclosures, indicated intent to proceed with the lender, and are within a 30-day window of your closing date.
What are the different stages of the appraisal process? 
Once the credit card authorization form is completed and all requirements above have been met, these are the steps to ordering and obtaining a copy of the appraisal:  
  1. Order → Morty’s team orders the appraisal through the lender or an external AMC website. 
  2. Bid → The AMC places a bid with the property details for an appraiser to accept. 
  3. Accept → An appraiser accepts the bid and confirms the cost and expected turn time. 
  4. Inspect → The appraiser views the property after confirming an inspection date with either the listing agent, homeowner, or builder. 
  5. Complete Report → After completing the inspection, the appraiser finalizes their report to be released to the lender for review. 
  6. Review/Approve → The lender reviews and approves the appraisal report. If any corrections or revisions are needed, they will be requested at this time and sent back to the appraiser for revisions. 
  7. Clear/Release to Client → Once the appraisal is cleared, it will be sent to the client and Morty for review. 
What are the contents of an appraisal package?
A completed package from an AMC generally contains the following:
  • Uniform Residential Appraisal Report, also known as Form 1004 (or 1072 for a condo) 
  • PDF based on this template form from Fannie Mae and Freddie Mac. 
  • Information about the property and about previous sales in the area, all of which may factor into the value of the home and/or its eligibility for a mortgage per agency and lender guidelines. 
  • Photos of the property (interior and exterior) that support the property details (room count, bathroom count, amenities, acreage, etc). These also might highlight any potential issues with the property (repairs/hazardous issues).
What is the most important information in an appraisal report?
  • Appraised value. 
  • Condition of the home: “as is” or “subject to completion”. 
  • Effective date of the report. 
  • Property statistics: square footage, room count, bathroom count, lot size, location, etc.
  • Comparables: recent properties that have sold in the last 3 to 6 months in the surrounding area. 
  • Appraiser’s comments detailing their conclusion based on the inspection and research that was done. 
What happens if the value comes in low or there are errors in the report?
If your appraisal value comes in lower than your purchase price, you have a few options. You can negotiate with the seller to lower your price, if this is allowed as part of your contract. Or you can add more to your down payment to keep the Loan-To-Value ratio the same. 
If you believe there was an error in the valuation, the appraised value can be challenged, and the report can be modified through an appeal process. This appeal process does not guarantee there will be any changes made to the original report or value. If you are interested in appealing an appraisal, you must talk with your loan officer at Morty, and you or your realtor will provide 3 comparable properties in the area that are a better match than the ones used in the report. Morty will submit the appeal on your behalf with the lender.
Once the information is provided and the appeal is sent to the AMC, the request will be reviewed by their team. The concerns from the appeal will then be sent to the appraiser to make adjustments, if applicable. It can sometimes take up to two weeks before we hear the results of the appeal, so keep in mind that if you do decide to submit an appeal, it could delay your closing. You’ll want to have a conversation with your MLO, your realtor, and the seller so that everyone is aware of potential delays.

→ Continue to the next article in this series, Appraisal Timeline

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