Appraisal must be ordered by third party?

[aheller75]

Hello,

We were looking to have our house appraised to see if we are in a position to refinance. I contacted a couple of local appraisers, asking what they charge. They each got back to me, but both said basically the same thing "an appraisal for a re-finance must be ordered by a third party not by the homeowner directly."

Is this true? We wanted to get some sense of what our house is actually worth before we started contacting mortgage brokers (something other than Zillow and their ridiculous algorithm) and wasting their time. If it is too low, we won't bother, but if it is reasonable, then we would proceed with contacting a broker. I don't understand what the difference is whether a broker orders it or if I do have it done independently.

Just curious and thank you!

 

[CANative]

The borrower cannot order or pay for an appraisal directly. But you are free to hire an appraiser if the appraisal is for your own use. Just be aware that you cannot use that appraisal for lending and neither can your lender or broker. You'll have to pay for another appraisal and it's very likely (almost 100%) that you won't get the same appraiser.

 

[Tom Woolford]

There is no reason an appraiser can not perform a valuation service for you directly. That said, it could NOT be used for lending purposes. For that, the appraiser would have to be engaged by the lender, or their agent.

 

[eld2310]

You can order an appraisal on your own, but you won't be able to use that appraisal for your refinance - a second appraisal will have to be produced that was not ordered by someone who will financially benefit from it's outcome (that means you or the loan origination staff). So if you decide to move forward with the refinance then you'll be paying for two appraisals, but that certainly doesn't mean you "can't" order the first one for your personal use. Just know that the lender won't likely accept it for their use.

.

 

[sandpiperapp]

Agree with everyone above. You can order the appraisal directly, use it to help make a decision whether to re-finance or not. if you decide to go ahead with the refinance, the lending institution will NOT use that report, but order a new valuation.

 

[aheller75]

Well, then. Looks like I should wait until we are ready to try and refinance before getting an appraisal.

Two follow up questions:

1) If I go to refinance, get an appraisal, but do not get the number we need. How long is that appraisal good for? If we change brokers, woul dwe be required to get an additional one as well?

2) We have had 3 appraisals on our house in the last 7 years and each time the price was between $350 and $450. However, when researching appraisers to hire myself, they were all in the $250 price range. Is there something sneaky going on? Why would there be such a discrepancy in price for an appraisal? If a broker were to tell me that it would cost me $400, is it within my right to tell him that I have seen them for $250 and refuse his price?

Thanks.....

 

[DMZwerg]

Also, it sounds like you called ethical appraisers who did not want you to waste your money paying for an appraisal privately then finding out you have to pay the lender or broker for a 2nd appraisal.

 

[George Hatch]

There are rules in banking that require them to engage the appraiser on their end, whether its via their own internal pipeline or is outsourced to a company that specifically does that. The intent is to keep the appraisal engagement independent of the loan origination process. The mortgage brokers and loan officers aren't supposed to have any say in who does the appraisal or any substantiative contact with the appraiser about value conclusions.

In answer to the last two questions you asked:

1 - It's up to the lenders to decide whether or not they want to use an existing appraisal. Under the banking regulations they're allowed to use existing appraisals, so long as it was engaged by another lender and they review it to ensure it meets their requirements. However, many lenders will only use appraisals that they engage because they want the direct relationship with the appraiser. Either way, it's their call to make.

In general, most lenders that will accept outside appraisals will take one that's as old as 90 days; a few will even take a 6-month old appraisal depending on the circumstances.

2. Your prior experience with retail appraisal fees in the $350 - $450 range is pretty typical. If you're now getting quotes below $300 then that may be a reflection of how tough times are for those appraisers. In the last few years a combination of circumstances has resulted in a more distressed market for appraisal services. Lots of appraisers have been starved out of the business and the survivors are competing pretty heavily with each other just to stay in the game. Our business is cyclical, just like real estate in general; and we have our boom-bust periods too.

The other possibility is that some of these quotes may not refer to the same type of appraisal report that appraisers would commonly submit to the lender, as your desire to get a pre-emptive look at the value doesn't necessarily require the same amount of research, analyses and report writing as what the lenders require. Different uses have different benchmarks for getting that "meaningful" result.

Lest you think I'm talking about the possibility of one or more of these appraisers shortchanging you, that's not the case. It's just that as a private party looking for the nuts-n-bolts value prior to deciding whether or not to pursue a loan, you don't necessarily have a need for a statistical analysis of the market conditions or a Cost Approach to value or the detailed diagram of your property or other documentation that the lenders use in their decision process. Fewer 'extras' may mean less work for the appraiser to do, for which they can pass the savings on to you.

What's really going to be important for your usage of this appraisal will be the analysis of the sales data. I'm sure all those quotes will involve that.

 

[sandpiperapp]

Another reason for the price difference could be that many times the lending institution that you or the mortgage broker use, often own the appraisal management company that they order the appraisals from and keep a large portion of the fee for themselves as additional profit.

 

[NORTON]

Well, then. Looks like I should wait until we are ready to try and refinance before getting an appraisal.

Two follow up questions:

1) If I go to refinance, get an appraisal, but do not get the number we need. How long is that appraisal good for? If we change brokers, woul dwe be required to get an additional one as well?

2) We have had 3 appraisals on our house in the last 7 years and each time the price was between $350 and $450. However, when researching appraisers to hire myself, they were all in the $250 price range. Is there something sneaky going on? Why would there be such a discrepancy in price for an appraisal? If a broker were to tell me that it would cost me $400, is it within my right to tell him that I have seen them for $250 and refuse his price?

Thanks.....

possibly because the broker or parent company is sending a portion of the appraisal fee to an AMC, which may or may not be owned by the broker's parent company....so yea, something sneaky is going on, but when it's legal, it's not called sneaky, it's called business.