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Understanding the Appraisal Process, Part II

Shawn Von Talge



05-01-2015

Home AppraisalA critical component of any real estate transaction is the appraisal. In a previous blog entry (which can be re-visited here) we covered some of the commonly misunderstood aspects of the appraisal process. In this article we describe the basic rights and exposures the borrower has in regards to the appraisal when purchasing or refinancing a single-family residence.

For those that may be first-time homebuyers and/or are new to the loan process, an appraisal is a formal and customary document that estimates the fair market value of the real estate in question. One of the primary purposes of the appraisal (from the lender’s perspective) is to ensure that the buyer (e.g. the ‘borrower’ we’re providing the financing to) is not over-paying for a particular residence. So if a buyer has signed a contract to purchase a home for $250,000, the appraisal is what will formally confirm whether it is actually worth this much.

With this is mind it’s important to note that the borrower is who will be responsible for the cost of the appraisal (usually $500 or less). So if the loan process gets to the point where the appraisal is conducted and for one reason or another the loan transaction doesn’t end up closing, the borrower will still responsible for this cost. Whether it be because the lender denies the transaction, the seller cancels the contract, the home under appraises, or something else, once the lender has ordered the appraisal the cost will be transferred to the borrower.

With the above out of the way let’s briefly talk about the borrower’s rights as it relates to the appraisal. First, the borrower has the right to obtain a copy of the appraisal within three days of the lender receiving it. In connection with this the borrower will also sign an acknowledgement confirming they’ve received a copy within this three day period. The borrower also has the right to ask questions directly to the appraiser. It is recommended that the borrower first turn to the mortgage professional with any questions regarding the appraisal as he or she will be able to explain things in terms of their importance towards the loan transaction. If clarification is needed beyond what the mortgage professional is able to provide, the borrower is always welcome to inquire with the appraiser for further guidance.

Thanks for reading!

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