Everything I Need to Know About Appraisals I Learned from Quicken Loans
At Quicken Loans, our goal is to give our clients the most amazing mortgage experience possible. We understand you may have questions about how the value of your home can affect your loan. We want to help! We’ve compiled some videos, articles and frequently asked questions, to help you understand the appraisal process more clearly.
FAQs About Appraisals
Basics of Appraisals
- What is an appraisal?
An appraisal is an opinion of value that is completed by a professional appraiser who visits and inspects the size, condition, function and quality of the home. There are a few steps in the process. First, a licensed appraiser comes to the property and inspects the home. Next, the appraiser will research similar homes in the area and compare recent sales to determine a fair market value. The appraiser will then give a final appraisal report with all the data and research to issue a final “opinion of value.”
- How does an appraisal work?
Appraisals can vary by state, but there are three main parts to a home appraisal:
- The Inspection – a licensed appraiser comes to the property and inspects it to determine fair market value
- Comparables – the appraiser researches similar homes in your area and compares recent sales to determine market value.
- Final Appraisal Report – using the data gathered from the inspection and comparables research, your appraiser issues a final appraisal report.
- Why do I need an appraisal to get a home loan?
A real estate appraisal helps to establish a property’s market value – the likely sales price it would bring if offered in an open and competitive real estate market. Appraisals protect both the lender, as well as the client, so they don’t overpay for a home.
- How is the appraiser selected?
Since by law Quicken Loans cannot do appraisals, a licensed independent professional appraiser selected by the Appraisal Management Company (AMC) conducts the appraisal. By law, the appraisal must be done by a third party who has no interest in the outcome of the appraisal.
Quicken Loans and Your Appraisal
- Does Quicken Loans do the appraisal?
No. Quicken Loans, as well as all other lenders, are in no way affiliated with the value of your appraisal or the appraiser selected for your home. Quicken Loans can place the order for an appraisal but cannot perform the actual appraisal. It is typically handled through the Appraisal Management Company (AMC) and appraisers are often selected from their affiliated network.
- Can clients ever choose their own appraiser? Why or why not?
No. Quicken Loans, as a lender, must facilitate the order and the Appraisal Management Company (AMC) manages where it goes. Due to recent Wall Street and consumer protection reforms, the Federal Housing Administration (FHA) and Fannie Mae have made this a requirement.
- Does Quicken Loans own a share of any Appraisal Management Company (AMC)?
No. Quicken Loans does not own any shares of TSI Appraisal Services.
- Does Quicken Loans use Broker’s Price Opinion (BPO) or Automated Valuation Model (AVM)?
Quicken Loans does not use a BPO or AVM. These tools are not adequate replacements for an official appraisal.
- Are there fees associated with the appraisal?
Fees are charged by a licensed, certified appraiser for an official opinion of market value as of a specific date. These fees are paid to the outside appraisal company and can vary based on the location and type of property.
- Does my deposit cover the cost of the appraisal?
Yes. Your deposit will go toward the costs we pay to third parties (on your behalf) while processing your loan. This includes your home appraisal. Keep in mind, as your lender we have no influence over the outcome of your appraisal. If you aren’t familiar with real estate appraisals, check out our Real Estate Appraisal Video Series on YouTube.
- Does Quicken Loans make any money off of appraisals?
No. We can never charge more than the actual cost of the appraisal fees.
- Does Quicken Loans make any money if a loan doesn’t close?
No. The success of Quicken Loans is based on happy clients who have closed a loan with us. Therefore, there is no benefit (financial or otherwise) for the company if a loan can’t be processed because of a low appraisal.
- When does an appraisal expire?
For the purpose of qualifying for a conventional, jumbo or FHA loan, an appraisal is good for four months (120 days) and must be current through the date of close. There are circumstances when the age of the appraisal may exceed this expiration under certain guidelines. A recertification of value, known as an appraisal update, may also be allowed if requirements are met. VA loans and certain FHA loans may require an appraisal to be dated within 90 or 180 days of the note and mortgage. If an appraisal has expired, we may require you to get an updated appraisal.
Other Questions About Your Appraisal
- Is my appraiser licensed in my state? What are the qualifications to be an appraiser?
Yes. Your appraiser is licensed in your state so that they are familiar with the geography and statistics of your area. In fact, appraisal licensing was set up in every state by the mid-1990s. State licensed and certified appraisers are regulated by their appraiser state regulatory agency who enforce the Uniform Standards of Professional Appraisal Practice, as well as state and federal regulations.
- Can I contact my appraiser directly after the appraisal is completed?
By law, clients and lenders cannot speak directly to appraisers regarding a home’s valuation assessment. Remember, Quicken Loans does not make money on a low appraisal and is just as hopeful as you are to have an appraisal that accurately reflects the value of the home. If you have questions about the report, please contact your Home Loan Expert and they will assist in getting the right people involved to address your concerns with the appraiser.
- The inspection only lasted 30 minutes. How can they know the value of the home?
Appraisers come to your home equipped with knowledge of your neighborhood’s value, recent home sales data and more. With all of this information, it takes on average between 20-45 minutes to conduct a formal appraisal. It’s important to know that in the post-bubble lending market many home loan and appraisal guidelines are government regulated and much stricter. These guidelines are put in place to protect you, the consumer. The government wants to protect people from getting mortgages they can’t afford, or large loans on houses that don’t have value. Appraisers tend to be very fair, or maybe even a little conservative in today’s market. Beyond the condition of your home – age, home type, location and foreclosures in your area all factor into your home’s value.
- If there are foreclosures or short sales in my neighborhood, will they affect the value of my home?
Yes. One of the factors in determining a home’s value is the recent sale of homes in your area that have similar square footage and amenities. Whether a home is a foreclosure or not, appraisers consider all recent sales when determining the current market value of your home. If foreclosed properties and short sales occur in your area, it could ultimately bring down the value of similar homes in the neighborhood.
- What happens if my appraised value comes in lower than what I told my Home Loan Expert?
When real estate appraisals come in low, it can restrict the terms and structure of the loan a homeowner could qualify for. In addition, Fannie Mae, Freddie Mac and other guidelines may require a fee adjustment. However, if your home appraisal comes in low, there are still some options available to you if you want to refinance. You can pay the difference in your closing costs, but if the appraisal is much lower than the loan amount, this may not be an affordable option. Unfortunately, if there isn’t a loan available based on your home’s value, you may have to wait until the values in your neighborhood start to bounce back.
- I had an appraisal done a few months ago. How did my value change so much since then?
Values can fluctuate throughout the year due to consumer demand, nearby foreclosures, short sales and much more.
- My house is worth half the amount of my next-door neighbor. Why?
Keep in mind that a number of factors come into play when determining the value of a particular home, including square footage, amenities and more. Before you fret, make sure you’re comparing apples to apples. Looking at recent home sales in your neighborhood can be misleading. If you have a small, 2-bedroom ranch, it’s probably not a good idea to use the sale price of a 5-bedroom, bi-level neighbor as a comparison.
- I searched online and found a few websites that tell me my value is much higher than what the appraiser said. Why?
Online estimates are dependent on two things: how recent their data is and how frequently they update their estimates based on that information. Nothing can replace a real person doing a live walk-through of your home and seeing all that it has to offer first-hand. If you believe there is an error on your appraisal regarding square footage or amenities, contact your Home Loan Expert so they can connect you with the right folks who can address your concerns.
- Can I challenge the appraisal amount if I disagree with it?
Appraisers are required to be objective and ethical. They cannot accept an assignment based on a certain appraised minimum or maximum value. Real estate appraisals show approximate fair market value based on recent sales in your neighborhood. If homes in your area have foreclosed, they’re likely being sold at a greatly reduced price, which, in turn, affects the value of your home and your real estate appraisal. If the appraisal was done for lending purposes and you think the appraiser has missed higher sales that could have been used in the appraisal, or missed valuable features in your home such as a remodeled kitchen, contact your Home Loan Expert with specific information such as the address of a sale in your area that is comparable to your home. Since Quicken Loans cannot speak to the appraiser directly, we can pass your information along to the Appraisal Management Company to review.
Learn More About Appraisals
The Quicken Loans Zing! Blog has featured several articles over the years about the appraisal process. Read on to learn more!
Your Real Estate Appraisal Comes Back Lower Than You Thought it Would. Why?
Watch-It Wednesday: How Is My Home Appraisal Value Calculated?
Your Home Appraisal: What You Need To Know
The Age of 2 Real Estate Appraisals
Top 10 Things You Need To Know About A Real Estate Appraisal Inspection
Home Value Estimating
Green Home Appraisals Might Not Mean More ‘Green’ In Your Pocket
Important Information You Should Know Regarding Mortgage Refinance Appraisals
Important Information You Should Know Regarding Appraisals