Lorraine Ryall
There are many factors to consider when buying or selling a home, but one area often overlooked is the appraisal process.
The appraisal is ordered by the buyer’s lender to determine whether the purchase price is a true market value of the property. This is a crucial element of the sale, which is done after the inspections have been completed and is the final contingency to be met.
The appraisal contingency in the purchase contract states, “The sale is contingent upon an appraisal of the premises for at least the purchase price.” If the appraisal comes in below the purchase price, the contingency has not been met and the buyer can withdraw their offer. Because you may be weeks into the closing process before the appraisal is completed, you want to do everything you can to help the appraiser meet the value.
Why Appraisers Are More Conservative
Appraisers are more conservative now than ever, since the real estate crash of 2008 and the new regulations implemented since then.
Prior to the crash in the housing market, mortgage lenders pretty much had free reign and were notorious for pressuring appraisers to inflate values. Lenders could use any appraiser and often had just a handful of appraisers who got the bulk of their business. This practice was arguably one of the causes of the housing bubble.
After the crash, regulators came down hard on the role the lenders played in the appraisal process, and lenders can no longer be in direct contact with the appraiser. As a result, many lenders chose to outsource the entire process to appraisal management companies (AMCs). The management company selects the appraiser and coordinates the appointment with the listing agent.
One of the issues we have seen with some of the third-party management companies is they are using appraisers who are unfamiliar with the area and the local real estate market, which can cause below-value appraisals. Having a third party to order appraisals also has added another layer in the process and can cause delays in getting the appraisal completed.
Another change directly affecting the appraiser is the Uniform Collateral Data Portal (UCDP). It is a single portal for the electronic submission of appraisal data files to Freddie Mac and Fannie Mae and facilitates the electronic collection of appraisal report data. With the new UCDP, all appraisals are entered into the database and given a score by the automatic assessment system. If the appraisal scores too high, it will be flagged and sent back to the appraiser for further review. If an appraiser gets too many appraisals flagged, they could be added to a black list.
With the appraisals being so scrutinized, appraisers are much more conservative than ever before, and it is imperative to ensure the appraiser is experienced, knows the area, and is familiar with the neighborhood.
How to Prepare for an Appraisal
- Think of this as the most important showing you will have. You may be in the process of packing and moving. So, your house is not going to be show perfect anymore, but try to show it the best you can. The general appearance of your home can affect the appraiser’s valuation.
- Have moving boxes stacked as neatly as possible.
- Open the blinds, and turn on the lights.
- Make sure all the rooms are accessible.
- Have the home as clean and tidy as possible inside and out.
- Keep pets away.
Frequently Asked Questions
When is the appraisal ordered?
Typically, it is ordered after the inspections are complete but can be ordered at any time.
How long will the appraiser be at the house?
Approximately 30 minutes to an hour, depending on the size of the property.
How long does the appraisal take to be completed?
This will depend on the type of loan and the lender. On average, however, it will take two to five days to get the appraisal assigned once it has been ordered, and then an additional 5 to 10 days after the appraiser has come to the home to get the report completed and back to the lender.
Who pays for the appraisal?
The buyer pays for the appraisal at the time it is ordered through his lender.
Can you dispute an appraisal?
Yes, but it is very time consuming and hard to do, and there is less than a 10 percent chance of increasing the valuation after an appraisal, which is why it is so important to be ready for the appraiser.
Can a seller get his own appraisal?
A seller can have their own appraisal done at their expense. However, it cannot be used as the appraisal for the buyer’s lender. The mortgage lender will always order an independent appraisal.
Your Realtor also can be an important part of the appraisal process. I would recommend asking your Realtor how they assist through the appraisal process.
For more information on what you can do to prepare for the appraisal, please contact me directly.
Lorraine Ryall has been a Multi-Million Dollar producer for the past nine years. If you are thinking of buying or selling and would like more information or a market analysis, please contact her at Lorraine@Homes2SellAZ.com, or call (602) 571-6799. Visit her website at Homes2SellAZ.com.