Credible and reliable opinions of value help to stabilize real estate loans and investments, and appraisals are particularly valuable because they are an objective and unbiased source of real estate information.
To help consumers understand the role of appraisals in the lending process, the Appraisal Institute offers these tips.
1. Understand the role of mortgage appraisals. Lenders want to know how much a property would bring in an open market. Mortgage appraisals can help both lenders and consumers in making sound financial decisions.
2. Make sure the lender hires a qualified appraiser, such as an MAI or SRA Designated member of the Appraisal Institute. The best way to combat potential problems with appraisals is to ensure the appraiser hired by the lender is highly qualified.
3. Accompany the appraiser during the inspection. Appraisers welcome information that would assist development of credible assignment results, such as improvements or upgrades the homeowner has made. Ask the lender for permission to accompany the appraiser.
4. Ask for a copy of the appraisal report. Consumers have a right to, or can obtain a copy of, the appraisal. Specifically, federal law requires lenders provide routine delivery of the appraisal to consumers upon request within 30 days.
5. Examine the appraisal report. Although appraisal review is best performed by qualified appraisers, consumers can examine the appraisal for potential deficiencies. Homeowners should ask themselves:
- Do adjacent homes add or detract from the value of the subject property?
- Is the subject property equal to or lower in price than surrounding homes?
- Does the floor plan have any functional problems?
- Does the house require major remodeling to make it comparable with similar homes in the same price range?
- Is the number of bedrooms and baths in the home comparable to similar homes in the same price range?
6. Appeal the appraisal. Most lenders have appraisal appeal procedures, known as “Reconsiderations of Value.” If the homeowner is aware of recent, comparable sales information or items that may not have been available or considered by the appraiser, provide those to the lender.
7. Ask the lender to order a second appraisal by a qualified appraiser. If problems were found with the first appraisal, consumers can and should obtain a second appraisal.
8. File legitimate complaints with the appropriate state appraisal board, or make a referral about an Appraisal Institute Designated member.