Appraisal Review Prior To Clear to Close
A home appraisal is ordered during the mortgage process and underwriting process. An appraisal normally takes a week to complete unless a rush appraisal is ordered which costs more money. There are two types of home appraisals. A conventional mortgage loan home appraisal and a FHA mortgage loan appraisal. A FHA mortgage loan appraisal can be transferred from one FHA mortgage lender to another in the event if the borrower gets denied from one FHA mortgage lender and decides on taking it to another FHA mortgage lender.
Ordering The Home Appraisal
An appraisal cannot be ordered by the client and it is ordered by the mortgage lender through an Appraisal Management Company. Your loan officer is not allowed to talk to the appraiser and it is illegal to try to influence an appraiser. All contacts from the mortgage lenders needs to go through the Appraisal Management Company.
Once all of your mortgage conditions have been met and prior to the mortgage lender issuing a clear to close, an appraisal review is conducted by the mortgage lender’s appraisal review department.
Problems with Home Appraisals
There are times where the appraisal comes in lower than the contract purchase price. When this happens, the seller normally lowers the contract sales price and the deal goes through. However, there are times where the sellers will not budge on the contract sales purchase price. On situations like this, the appraisal needs to be rebutted. An appraisal rebuttal is requested by the mortgage lender to the Appraisal Management Company. The realtors need to submit comparables justifying their appraisal rebuttal. The Appraisal Management Company will then review the appraisal rebuttal and see if the additional comparables submitted by the realtors would justify an appraisal value increase. If that is the case, the appraisal value gets readjusted and a new value is submitted to the mortgage lender.
In the event if the value of the home does not increase after the appraisal rebuttal, the home buyer can still purchase the home but would need to come up with the difference between the appraised value and the actual purchase price. The mortgage loan will be based on the appraised value of the home.
Mortgage lender not agreeing with the appraisal
The appraisal review department of a mortgage lender can not agree with the appraisal and order an appraisal field review, which is a second drive by appraisal to justify the value of the first appraisal. If the appraisal field review comes in line with the orginal appraisal, the deal can proceed to close. However, if the appraisal field review comes in at a lower value than the first appraisal, the mortgage lender can use the lower of the two appraisal values or a value in between the original appraisal and the lower field review. If the appraisal field review comes in at a higher value, the lower of the two appraisal value normally is used.
There are also times where the appraisal review department will not agree with the appraised value of the subject property and cut the value deemed by the appraisal review department. On such cases, the mortgage loan will be based on the new modified value adjusted by the appraisal review department.