When an appraisal happens, multiple people are involved with the most central being the Realtor, the lender, and the appraiser. The appraiser’s job is simple: To assess the current value of a home. As you may have experienced, the Realtor’s job when working with the appraiser, however, can be a bit more complicated (especially because the lender cannot be involved with the appraisal). Read on as we explain what an appraisal is, how Realtors can be helpful to appraisers, and why lenders remain hands-off during the appraisal process.
What is the point of the appraisal?
An appraisal is the lenders way of protecting the investment they are about to make. Beyond that, it’s to make sure the home value is up to par with the asking price of the home. This is done by comparing a home to those of similar homes in the area, or as you probably call them “comps" or comparables.
The value of a home at the appraisal is what will determine the loan price, so it’s important that the appraisal is correct. It’s also important to note that an appraisal is not the same as an inspection, and both need to be done before a home is purchased.
How can a Realtor best help the appraiser?
A Realtor is instrumental in the appraisal process going well. If you are the listing agent, you have direct access to the clients who currently own the home. Your clients need to be doing their best to keep the home show ready, even for the appraiser! This includes making sure any upgrades to the homes have been listed and sent off to the appraiser. Remember: an addition to the home, a pool, or all new appliances in the kitchen can help drive up the appraisal value!
It’s important the appraiser has access to the home on his or her time. As the agent, the best thing you can do is be available to them at their convenience.
There is no such thing as too much documentation when it comes to appraisals. This will help with comps, as well! The more you can tell the appraiser, down to the school districts, etc. the more they will understand why the home is priced the way it is.
Don’t forget a copy of the sales contract. This is crucial to the appraiser and their reviewing it is a requirement when appraising the home!
Can a Realtor talk to an appraiser?
Contrary to popular belief, yes, a Realtor is welcome to speak to an appraiser! While the Federal Housing Administration (FHA) prohibits lenders from being in anyway affiliated with the appraiser, Realtors can speak to appraisers in order to give information on the property.
Why can’t lenders talk to appraisers?
The HVCC, or Home Valuation Code of Conduct, put regulations into place to keep home appraisals as fraud free as possible. Lenders cannot work directly with appraisers but are able to hire a third party to do so. This allows appraisers to remain neutral while assessing homes for purchase.
Lenders are also required by the Consumer Financial Protection Bureau to let home buyers and sellers know they can receive a free copy of the appraiser report and must give that report to the buyers at least three days before closing.
Do your clients have options if the appraisal comes in low?
Absolutely. It can get problematic if the appraised amount comes in much less than the negotiated offer. The home buyer is then responsible for the gap between the two amounts. With the market being so tight in many areas, we’re seeing many home buyers dropping the appraisal contingency on the contract to win a bidding war. And by dropping this contingency, the home buyer is telling the home seller that they can pay the amount of the price gap in cash on closing day. Ask a Churchill Home Loan Specialist about our Appraisal Gap Analysis for clients. We’ve helped a lot of clients using this strategy.
As we stated earlier, appraisals are done to secure our investments as lenders. But as lenders, it's important that we're helping our clients feel secure about their investment.
At Churchill Mortgage, we put people over profits. That means we don't just lend out money to buy a home. Instead, we partner with people to help them achieve their dream of debt-free homeownership. We're with your clients every step of the way. If you're a Realtor who wants the best for your clients, we'd love to hear from you. Reach out anytime!
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