When to order an appraisal

[Craig Brandes]

At what time should an appraisal be ordered? My lender requested an appraisal and then denied my loan - meaning I paid for an appraisal and get nothing. The property appraised for the full selling price and no problems exsisted. Shouldn't the loan be approved pending the appraisal value? That way the buyer isn't out any money. Any help would be great.

 

[Anonymous]

Craig,
I'm sorry that your loan didn't close. From an appraisers perspective the appraisal should be ordered as early in the process as possible. Appraisers need time to gather information. I can't count how many times a rush appraisal is ordered and vital information like zoning or comparable information is not immediately avaliable. The result of this situation is a bad or no appraisal report.

 

[wyecoyote]

Craig,

I agree with Walt the appraisal should be ordered as one of the first things.

As far as you paying for the appraisal and getting denied the loan. I don't know the reasons for the loan denial there could be several beyond just the appraisal report. You paid for the appraisal report as you should. This is a third party expense paid to use appraisers. Our fee is not contigent upon the loan closing. So the lender would have to pay us. Since they don't get anything if the loan doesn't close they collect the fee from you to pay us.

Ryan

 

[Dee Dee]

Craig,

I can't tell you how many times I've run into situations similar to yours!

My opinion (getting ready to duck here), is that the lenders frequently try to 'seal the deal' by taking money from the customer for the appraisal. Once the homeowner/buyer has put money on the line they are much less likely to continue shopping around for other lenders. Often the lenders do this before fully checking out the owner/buyers background to see if they'll be able to qualify for the loan.

It's been a long haul, but I've finally managed to weed out most lenders like this from my client list. A good lender will do a thorough check to see if the the customer's financial background will allow the loan to close before they will order an appraisal from me.

Unless there is an absolute pressing deadline, such as in a sales contract, there is no excuse for lenders to order an appraisal before qualifying the customer.

 

[Craig Brandes]

Here is the full story on the deal:
I was using a loan broker and attempting to purchase a piece of raw land(2acres) for future home site. The loan broker pre-qualified us and said our credit was so good that there would be no problem getting the loan. We started all the paperwork, placed a bid on the land that got accepted-based upon loan approval. Appraisal was ordered and a few weeks later the loan was approved but for only 70% of the value. Loan broker promised that he could get 95% based on our credit and a program with a local credit union. Now we have to come up with 25% to close the deal and if not we are out $300 for appraisal. I feel that he ordered the appraisal too soon assuming we would get 95% financing and should reimburse us the $300 because I would have never bid on the land if I knew I had to come up with 25%.

 

[Judy Whitehead (Florida)]

It has been my experience that the lenders will never loan that high loan to value on vacant land. In this area, typically it is usually 70-75% LTV. Sometimes the mortgage brokers have used programs in the past, however, that are no longer available. Sometimes the brokers are just so inexperienced that they promise anything. It is also my experience that you must be a member of the credit union to get a loan from them. I use a credit union for my personal accounts and no loans are made to non-members.

 

[Tim Hicks (Texas)]

It is also my experience that many loan officers don't really know what they can do or can't do until it is too late. An experienced loan officer (many years of service) can tell you what LTV you would need on a land loan. It has been my experince that many loan officers are new and not very well versed on the loan business. Many know only how to do a loan one way. If you throw them a curve, 2-4 family property, land loan, investment property, etc., they will attempt to promise things they can not deliver in an effort to cover their incompetency. This is not true of all loan officers, but it is true of many "green" loan officers. Monthly, I get scolded my borrowers because they were told that they would only need a drive-by appraisal, when the underwriter (and/or appraiser) makes the call on what type appraisal is needed or required. Drive-by appraisals are the least reliable venue to market value and should not be promised if their is the least bit of value question. I have received orders for multi-family properties as drive-bys. I have received orders on multi-famly properties as single family homes and vice versa. I have gone out to appraise for a home improvemet loan before, when the loan was really a home equity loan. I have been asked to do a home equity loan appraisal, when it was actually a home improvement loan. I have heard borrowers sqawk because they could not get a 95% loan on an investment property like promised. There are many different rules in the mortgage business that pertain to non-single family properties that many loan officers think can be applied to every loan.

My suggestion and my opinion. If you are buying any kind of property, choose an appraiser and have an independent appraisal done for your own protection. That way there is no coercsion on the appraiser to "make the deal work" and have you over pay for the property. Plus, that appraiser can probably recommend a reputable loan officer that can handle your type of loan. This is directly opposite of how the system works, but is the safest for the consumer and could be less expensive, too. Sometimes, we know lenders that don't have some of the up front and back loaded costs that many borrowers get saddled with. Not all loan companies are trust worthy and have the consumer's best interests in mind.

 

[Mountain Man]

If he can't do the financing, ask the broker for a letter to release the appraisal to be use by XYZ bank (or where ever you go for the loan). If you want to use the appraisal with another lender, the appraiser has got to have a letter of release in the file. Remember, the lender is the appraiser's client. Yeah you pay for it, it is a cost of wanting to borrow the money, but the lender is the client. However, I doubt that ANY lender will give an 80% lot loan, much less 95% financing. Most land/lot loans are 75% at best, with a 7 year balloon.

 

[Anonymous]

Craig,

Sounds to me like this guy had never donea land loan before. I would ask him to show you the information he had showing any lender would loan 95% on vacant land. It is a rare bird Craig.

As far as being out the $300, you can think yourself and the rest of the consuming public, including, yes us appraisers. As you may know, over the past sevral years, many in the lending business have attempted to make this process as quick as buying a car. In doing so, some of the old checks and balances have been thrown out the window. The old way, us appraisers and the surveyor would be the last people called, after ecerything else was approved. Now, the consumers want 2 week closings, instant approval etc. So, now, nobody waits, everyone does all their work at the same time. If the deal falls through, this is the price you pay for the consumer demand of speed.