Appraisal Review Process
Part of the mortgage approval process is to have an appraisal completed by a licensed appraiser. Once the appraisal is completed, the mortgage lender will scrutinize the appraisal and goes into an appraisal review process. Just because a FHA appraisal or Conventional appraisal has been completed and signed off by the appraisal management company does not mean that the appraisal will be accepted by the mortgage lender. Every mortgage lender has its own appraisal review process. Some mortgage lenders are extremely lenient and will just accept the appraisal that has been submitted and will not scrutinize the appraisal as other mortgage lenders. There are other mortgage lenders who will go over an appraisal with a fine tooth comb. Most buyers and sellers feel relieved once they get an appraisal back with the value they are expecting and in the majority of cases, the actual appraisal comes out alright during the appraisal review process. However, there are cases where the appraisal review underwriter might lower the value of the actual appraisal due to many reasons.
Examples Of Why Appraisal Review Underwriter Lowers Value Of Appraisal
One of the biggest reason where a mortgage lender lowers the value of the actual appraisal during the appraisal review process is because the appraisal review underwriter does not feel comfortable with the comps. Comps are recent sales of similar and like properties which are nearby the subject property. There are cases where when a home buyer purchases a unique property, the appraiser cannot get comps that are nearby or comps that are equivalent to the subject property. If this is the case, the appraiser needs to go outside the area and make positive or negative adjustments. On cases like these, the appraisal review underwriter may not agree with the value of the appraisal and come up with his or her own market value. For example, if the appraised value of a subject property came in at the purchase price of $365,000 and the comps used were over a one mile square mile and the comparables were older than six months, the appraisal review underwriter can have a problem. The appraisal review underwriter might order a second appraisal or a field review appraisal. A field review appraisal is a second appraisal where the appraiser does a drive by and is equivalent to a second opinion. If the field review or the second appraisal comes in the same value as the original appraisal, then the original appraisal stands. If the second appraisal comes in lower than the original appraisal, then its up to the appraisal review underwriter whether to use the lower appraisal or the average of the two. Unfortunately, whether the mortgage lender orders a second appraisal or an appraisal review, the home buyer will be stuck with the tab and needs to pay the additional appraisal fees.
Appraisal Review Revaluation Is Different Than Low Appraisal
Getting a low appraisal is different than an appraisal review underwriter lowering the value of an actual appraisal. If the subject property gets a lower market value than the purchase price, the home buyer can request an appraisal rebuttal from the appraisal management company through his or her mortgage lender. However, if the appraisal comes in at the same value as the purchase price but the appraisal review underwriter has a problem with it, then a second appraisal or field review appraisal needs to be ordered. The appraisal review underwriter can request additional comps from the original appraiser to justify his or her value as well too. All in all, just because you get an appraisal back does not mean that the mortgage lender will automatically accept its value. Most of the time, the mortgage lender will take the value but there are cases where the appraisal gets scrutinized during the appraisal review process.