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How an Appraisal Works

An appraisal is done to help establish a property’s market value in order to protect both the lender and the buyer, ensuring they don’t overpay for a home.  A real estate appraisal is essentially an opinion of value that is completed by a professional appraiser who visits and inspects the size, condition, function and quality of the home.

The appraisal process can vary by state, but typically, a licensed appraiser visits the property and inspects it to determine fair market value.  The appraiser then researches similar homes in your area and compares recent sales to determine market value.  Finally, using the information gathered, the appraiser issues a final appraisal or ‘opinion of value.’

In order to protect the buyer, lenders like The Mortgage Warehouse, LLC. cannot do appraisals.  By law, a licensed independent professional appraiser conducts the appraisal.  This protects the buyer by offering a fair determination of value from a third party who is not affected by the outcome of the appraisal.  The Mortgage Warehouse, LLC. is in no way tied to the value of your appraisal and though we can help you start the process of getting an appraisal done, we never perform the appraisal or choose the appraiser.


How an Appraiser is Selected

A licensed independent professional appraiser selected by the Appraisal Management Company (AMC) conducts the appraisal. By law, the appraisal must be done by a third party and The Mortgage Warehouse, LLC., as well as all other lenders are in no way affiliated with the value of your appraisal or the appraiser selected for your home. Buyers also cannot choose their own appraiser.  As the lender, The Mortgage Warehouse, LLC. must facilitate the order and AMC manages where it goes. Due to recent Wall Street and consumer protection reforms, the Federal Housing Administration (FHA) and Fannie Mae have made these requirements.

Qualifications and Licensing for Appraisers

Appraisers are licensed by state and must be familiar with the geography and statistics of their area. State licensed and certified appraisers are regulated by their appraiser state regulatory agency.  These agencies enforce the Uniform Standards of Professional Appraisal Practice, as well as state and federal regulations.

Fees for Appraisals

Fees are charged by a licensed, certified appraiser for an official opinion of market value as of a specific date. These fees are paid to the outside appraisal company and can vary based on the location and type of property.

Expiration of an Appraisal

For the purpose of qualifying for a conventional, jumbo or FHA loan, an appraisal is good for four months (120 days) and must be current through the date of close. VA loans and certain FHA loans may require an appraisal to be dated within 90 or 180 days of the note and mortgage. If an appraisal has expired, we may require you to get an updated appraisal.

Common Questions About Appraisals

The inspection only lasted 30 minutes. How can they know the value of the home?

Appraisers come to your home equipped with knowledge of your neighborhood’s value, recent home sales data and more. With all of this information, it takes on average between 20-45 minutes to conduct a formal appraisal. In today’s market, lending market many home loan and appraisal guidelines are government regulated and much stricter than they were before 2008. These guidelines are put in place to protect you, the consumer from getting mortgages you can’t afford, or large loans on houses that don’t have value.

Can I contact my appraiser directly after the appraisal is completed?

By law, clients and lenders cannot speak directly to appraisers regarding a home’s valuation assessment. If you have questions about the report, please contact your one of our loan specialists and they will assist in getting the right people involved to address your concerns with the appraiser.

What factors may affect my home’s value?

One of the factors in determining a home’s value is the recent sale of homes in your area that have similar square footage and amenities.  Appraisers consider all recent sales when determining the market value of a home, so foreclosed properties and short sales in your neighborhood could bring down the value of similar homes in the area.  Be aware of market conditions in your neighborhood and contact an The Mortgage Warehouse, LLC. loan specialist if you have questions or concerns.

What happens if my appraised value comes in lower than what I told my Home Loan Expert?

When real estate appraisals come in low, it can restrict the terms and structure of the loan a homeowner could qualify for and fee adjustments may be required by Fannie Mae, Freddie Mac and other guidelines. If your home appraisal comes in low, there are still some options available to you if you want to refinance. You can pay the difference in your closing costs, but if the appraisal is much lower than the loan amount, this may not be an affordable option.  If there isn’t a loan available based on your home’s value, you may have to wait until the values in your neighborhood start to go back up.

I had an appraisal done a few months ago. How did my value change so much since then?

Consumer demand, nearby foreclosures and short sales and market conditions all affect values and can fluctuate throughout the year.  Many factors contribute to value and can change regularly.

I searched online and found a few websites that tell me my value is much higher than what the appraiser said. Why?

Online estimates rely on data that may be outdated depending on how frequently they update their estimates.  Because values can change frequently, a live walk-through of your home by a real person is the most accurate way to determine value.  If you believe there is an error on your appraisal, contact your The Mortgage Warehouse, LLC. specialist so they can connect you with the right people to address your concerns.

Can I challenge the appraisal amount if I disagree with it?

As third parties, appraisers are required to be objective and to determine approximate fair market value based on your home’s amenities and recent sales in your neighborhood.  If you feel the appraiser missed valuable features in your home or higher sales in your area that could have been used in the appraisal, contact your The Mortgage Warehouse, LLC. loan specialist right away with specific details and they will pass your information and concerns along to Appraisal Management Company to review.

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