How Appraisals Can Affect Your Closing
Once a lender receives a home buyer’s application and appraisal payment, they schedule an appraisal. An appraiser’s job is to visit a property and confirm its value and therefore the size of the mortgage. For certain types of loans, an appraisal is required by law. The typical appraisal timeline is one to two weeks from the time a buyer files the application. But sometimes, just getting in an appraiser’s calendar can be tricky.
If you know you’re in a hot property market, appraisers may just have their hands full, which often happens during seasonal buying peaks. Sometimes, there just aren’t enough appraisers to go around. In rural areas, appraisers wield a lot of power when it comes to timelines and costs. We know of at least one appraiser that asked for $5,000 to complete a report in two weeks, about ten times what it usually costs!
We’ve also seen appraisers quietly drop assignments without notice. If they do this without telling anyone, including the Appraisal Management Company (AMC) that is managing the appraisal for the lender, the buyer and seller have no way of knowing that until the inspection doesn’t happen, which may be weeks after the initial order and assignment. Some small lenders and realtors claim that their close relationships with local appraisers can prevent this from happening, but that’s not true. The same pool of appraisers is available to everyone, and the assignments come through the AMC. Unfortunately, everyone has an equal chance of getting a bad apple.
But let’s say you get into an appraiser’s schedule quickly. What they find in the appraisal can also affect your closing date. Sometimes, the appraiser might surface new information that wasn’t previously known, or shared. Such as;
- Part of the property might be in a flood zone.
- The home could turn out to be a different type of property than what was originally listed (listed as a condo instead of a townhome- a small but meaningful distinction).
- Appraised value is lower than sales price. Depending on the difference this could make a major impact on the loan-to-value ratio. The outcome varies lender to lender but common options are negotiating the sales price, increasing the down payment amount, appealing the appraisal or in worst case scenarios dropping out of the purchase altogether.
- The property’s condition. Major structural repairs may be required prior to closing. Sometimes, natural disasters occur during the home buying process that requires updated appraisals once it’s safe to do so (think: before and after a hurricane or similar weather event).
As you can see, the appraisal process is a big wild card in a home buying timeline and can impact your closing date in lots of ways.