The Appraisal Process Made Clear

The appraisal process can raise many questions.  Especially when the value comes back from the appraiser below the purchase price.  Below are a few commonly asked questions with answers from the National Realtor Association.

Q. Will the homebuyer receive a copy of the appraisal?

A. Yes. The Equal Credit Opportunity Act (ECOA) requires creditors to automatically send a free copy of home appraisals and all other written valuations on the property after they are completed, regardless of whether credit is extended, denied, incomplete, or withdrawn.

Q. Who do I talk to if I feel the appraisal value is inaccurate in any way?

A. Once an appraisal assignment is completed and sent to the appraiser’s client, typically the lender, an appraiser may not discuss the results of the report to anyone but the client who ordered the appraisal, or parties designated by the client. In order to ask an appraiser to correct errors in the appraisal report or consider additional information, you must contact the appraiser’s client in writing.

Q. Why does the lender give the appraiser a copy of the sales contract?

A. The Government Sponsored Enterprises (GSEs) require that an appraiser analyze the sales contract and the appraiser must confirm analysis of the contract on the appraisal report. The appraiser looks at the terms of the sales contract and compares them with what is typical in the market. The sales contract has information such as the interest rate, the down payment amount, seller contributions or other personal property items that might be included in the sale. The appraiser must also verify if the property seller is the owner of public record.

Q. Why do appraisers sometimes take assignments if they live outside of the market area?

A. Appraisers are required to be competent in the geographic area where they are working. Some appraisers work in cities and counties beyond their residence, but are knowledgeable about those specific areas. If you suspect that an appraiser is not competent to appraise in your area, you may contact the lender who is the appraiser’s client.

Q. Does a buyer’s choice of financing impact the appraisal process?

A. Yes. The appraiser must comply with the Uniform Standards of Professional Appraisal Practice (USPAP) and appraisal regulations, but also follow any additional requirements from the mortgage lender, Freddie Mac, Fannie Mae, FHA, USDA and VA. For instance, some loans will require the property to meet certain minimum property requirements.

Here is a link to a helpful pamphlet courtesy of the National Association of Realtors.  It was developed for real estate brokers to answer many other FAQs regarding the appraisal process.