A Quality Appraisal, LLC specializes in appraisals for non-lending or private parties (divorce, estate, presale, etc.), but we receive emails and phone calls almost every day from Portland area homeowners wanting to price or order an appraisal to use for home refinancing or other lending purposes. Some of these callers just want to know what we charge to compare with the lender’s good-faith estimate and to make sure that they are not being overcharged. In these cases, we are always happy to provide a quote.
Other callers want to order their own appraisal before refinancing. I explain to such callers that lenders typically have their own networks for ordering appraisals and that the caller will need to check with the lender before proceeding with an appraisal from our company. There are two reasons for lenders stipulating who and where your appraisal is ordered.
1. After the recent mortgage crisis, rules adopted that made it mandatory for government-sponsored loans like Fannie Mae and Freddie Mac to ensure stricter appraiser independence. (For instance, no pressure is permitted for appraisers to meet a number.) Prior to these new requirements, it was common for appraisers to receive calls from loan professionals asking if the appraiser could perform an appraisal on a particular property at or above a particular value. Some lenders would incentivize the appraiser by saying, “We will send you lots of work if you can get this done for us.” I received such calls almost daily prior to the mortgage crisis, and some appraisers got themselves into trouble by accepting these offers.
Now, lenders are required to ensure that appraisals are ordered and paid for by people who do not benefit from the appraisal value (This includes homeowners and lenders.). If a homeowner provides an appraisal to the lender that the homeowner ordered, the lender cannot ensure regulators that the homeowner has not influenced the appraiser. The easiest way for a bank to confirm compliance is by outsourcing appraisal orders with an Appraisal Management Company (AMC). The AMC locates and engages the appraiser, provides instructions to the appraiser, usually checks the appraisal for quality, pays the appraiser, and delivers the appraisal report to the lender without any direct communication between the lender and the appraiser.
2. Lenders typically have proprietary requirements regarding appraisal development and reporting. Homeowners ordering an appraisal likely do not have the specific instructions required by the lender for the appraisal. This could also apply to private lenders who may “portfolio the loan” or do not plan to sell the mortgage on the secondary market. If the lender orders the appraisal through normal channels, the lender can make sure that the correct guidelines are provided to the appraiser.
Have I left anything out or do you want to join in the conversation? Let me know in the comments below.
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