During the homebuying process, obtaining a home appraisal is a critical step for both the buyer and seller. We’re sitting down with Robert Coke, VP Appraisal Department Manager, here at PrimeLending to help you understand the in’s and out’s of the appraisal process.
What is a home appraisal?
A home appraisal is performed by an unbiased state licensed appraiser to assess the true market value of a home. Market value is not what one person is willing to pay for the property but what the average market participants would pay. This tends to get painful for borrowers and production staff when a contract price is not met in the valuation.
Why is it important in the loan process?
Since the subject property is being used as the collateral in the event of a foreclosure, our team needs to know what that property would sell for in a reasonable amount of time in the event of a foreclosure.
At what stage during a home sale does the appraisal occur?
The appraisal is performed any time after the intent to proceed has been completed but must be completed prior to underwriting review of the file.
How long does an appraisal normally take?
In a typical market and a typical property, the appraisal can take anywhere from 3 to 7 days. This year has thrown the mortgage industry a curve ball with record low rates, incredible volume and a global pandemic. To give you an idea, last year PrimeLending averaged about 5,500 appraisal orders per month but this year we could average around 8,000 per month. In March of 2020 alone, we ordered almost 10,000 appraisals. With this rise in volume, we have seen turn times extended to weeks and fees doubled in a few markets.
What is the appraisal process at PrimeLending like? How is it better or more streamlined?
PrimeLending’s appraisal process is superior to most lenders in that we have our own appraisal management department. Most lenders utilize an AMC (Appraisal Management Company) which tends to be more expensive and less reliable for their borrowers. An AMC will add a fee on top of the appraiser’s fee to cover their overhead and typically will pay appraisers less which results in longer turn times for their reports. Quality also becomes a factor with appraisers that accept lower fees for the reports.
PrimeLending manages our own panel of market appraisers that we’ve built relationships with over time. This assists us in acquiring timely, quality appraisals for fair prices. This year has shown us that our relationships with these appraisers has set us apart in our markets. Other lenders have had to pay much higher fees for their appraisals. We’ve seen in certain (most) markets that fees have climbed and turn times have been extended, but our relationships have assisted us in minimizing those.
What should a new homeowner know about the appraisal process? Are there any tips or best practices you can suggest to a new homebuyer to make the process go more smoothly?
The appraisal process can be a very stressful part of acquiring a home loan, especially for a first-time homebuyer. I recommend putting a “packet” together for the appraiser. The packet should include a list of any recent improvements done to the property. Also, provide some reliable MLS sheets of similar homes sold in the neighborhood. Your real estate agent can pull the information for you. The appraiser is not required to take the packet or even look at it if they do not wish. In my experience, I place all the paperwork in an envelope and leave it on the counter for the appraiser to pick up while inspecting. Let them know it’s there for them and leave it at that. Don’t discuss what you think the property is worth.
If someone hasn’t had an appraisal in several years, how has the process changed this past year?
COVID-19 has changed the process due to social distancing as well as individual municipality guidelines. Most agencies and investors have adopted COVID-19 Appraisal Flexibilities which allow for exterior only inspections or in some cases even just a desktop appraisal. In some situations, the borrower may not be contacted for the valuation process.
At PrimeLending, we strive to make the home loan process hassle-free and efficient for our borrowers. If you’re ready to begin your homebuying journey, connect with a loan expert today.