First, a little background on the relationship banks have with the appraiser. In today's mortgage world, appraisers are independent. They are not staff appraisers employed banks or lenders. They perform each appraisal assignment as independent appraisers.
There has been a huge change over the past several years on what banks can do and what can be controlled in the appraisal process. Appraisers have always been, somewhat, independent but the housing crisis brought about significant changes. In 2009, Fannie Mae and Freddie Mac set the industry standard with the release of the Home Valuation Code of Conduct (HVCC). In 2010, the U.S. government further cemented the change with the Dodd-Frank Wall Street Reform and Consumer Protection Act.
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Based on these changes, the appraisal process complies with these rules and laws and it's important that you are aware of the process given how critical the appraiser's opinion of value (OOV) is for your loan. It is very important that you be as active as you can in the appraisal process. Getting a good, fair appraisal is better achieved when the client is involved. Although there are options to dispute the appraisal or request a 2nd appraisal, that process is very time consuming, costs additional money, and there are no guarantees it will improve from the first value.
The general appraisal process is:
The information about your appraisal order is entered into an ordering system. The information is limited and generally includes you name, contact info, what type of transaction you are doing and your address. The plans, budget, and any other details of your project you provide are attached in the system. Banks are not allowed to provide the appraiser with an estimated value or information about your loan.
The order is then placed with an independent, outside, third-party appraisal management company (AMC). The AMC is outside of the bank at a different location. They are not owned or employed by the bank. The AMC then randomly selecst an appraiser from an approved list of appraisers that is most appropriate for your home. The appraiser selected should be very experienced in the area where the home is located. They are also on a “construction list” so the appraiser should have experience in appraising new construction.
Once the AMC selects an appraisal company that would be most appropriate, they send a request to the appraiser. The appraiser will accept or decline the assignment at that time. A common reason why an appraiser may decline the assignment would be that they are too busy. This may delay the appraisal a day or two.
Once the AMC gets an appraiser to accept your appraisal assignment, they should call the appraisal contact with 48 hours. The contact may be the client or the builder. At that time we don't know which appraiser was selected and when that appraiser will contact you. Any communication we have with the appraiser has to go through the AMC. The updates we receive are through an internal application with notes.
The appraiser will call the contact to discuss the project. Or at least they should. Sometimes an appraiser feels he/she has all they need and doesn’t need to speak with anyone. This is why it’s important to have solid plans, budget, and specs that the bank can send to the appraiser.
The appraisal will include an interior inspection of your home if the project is a rehab and/or addition. If the project is raw land or a tear down, no interior inspection will be done.
Once the appraiser contacts you, feel free to ask him/her about your local market to ensure they know your area. If you get the sense they are not familiar enough with your area to fairly appraiser your home, let the bank know. They may be able to have the appraisal reassigned to a different appraiser.
You will also want to be familiar with your local market and what homes have sold that would be comparables. Don’t be shy about sharing addresses with the appraiser. You can, banks can’t. The appraiser is going to look up his own list of comps but there is nothing wrong with giving him a few more to consider, plus you may know a little bit more about the reasons for these sales. Maybe that house down the street sold low because the owner took a new job out of state and had to sell fast, or if it was an estate sale.
The appraiser will NOT know your neighborhood more than you. Even an appraiser that regularly does appraisals in your neighborhood will not know more than you because you live there every day. Be sure to communicate to the appraiser if there's information about the area your home is in that makes it more appealing to other areas close by.
Once the appraiser completes the report, they will send it into our appraisal review department for review. Every appraisal is reviewed by the appraisal review department.
The appraisal review department is reviewing the appraisal to make sure it's been completed in a manner that's consistent with standard practices. If the review department has questions or wants something corrected, they will send the report back to the appraiser to make those corrections. Those corrections could be simple such as typos , to more complex, like addressing the comps the appraiser chose.
Depending on how quickly the review department reviews the appraisal and if corrections need to be made, the appraisal could be in review for one day to one week.
Once the appraisal is completed and gets through review, the bank will get notified electronically that the appraisal is approved. This should take 2-3 weeks from when the appraisal is ordered. At that time you will receive a copy for review.
Dispute and Second Appraisal
So what happens if you don't like the result of the appraiser's value? There are two options if you don't like the appraiser's OOV:
Dispute the appraisal - You can dispute your appraisal if you believe it is factually inaccurate or does not represent market value.To do this you will need to complete a dispute form.The dispute results could take 2-4 business days.As you might imagine, getting the appraiser to change his own opinion is a tough task.The success rate for appraisal disputes is low and if successful the improvement is generally small.
Request a second appraisal - If you are not satisfied with the results of the dispute, a second appraisal may be able to be ordered.To do this the bank needs to make a request to the review department.If they approve the second order request, there may be a fee to do so..The process and timing of the second appraisal will be about the same as the first appraisal.
While everything is done to obtain the best possible outcome for the value, the appraiser will compile his or her own opinion of value as an independent appraiser. The best advice I can offer is to do your prep work upfront for the appraisal appointment and be patient for the results.