Who can order a home appraisal?

Is it ok for anyone to order a home appraisal?

Home appraisalI received a call this week from a homeowner who wanted to order a home appraisal for a refinance loan. They knew the mortgage company would need it to complete the loan. What they didn’t know is that several years ago government legislation made it almost impossible for the owner to order the home appraisal for this type of situation.

They could have potentially been out the cost of an appraisal and the report could not have even been used. It’s important not only in mortgage lending but also in other situations that the correct person order the home appraisal. Today I’m going to discuss several situations where a home appraisal is needed and who should order it. Knowing this information will help you avoid spending money on an appraisal you cannot use.

Reason for home appraisal and who should order it

Mortgage loan appraisal

I’ll start off with this situation because it’s the one I encountered this week. Years ago it was not uncommon for homeowners to order appraisals. This occurred mostly when a non local mortgage company was involved who did not have local appraiser contacts. The mortgage company would instruct the borrower to find an appraiser to use and then send the appraisal to them when it was completed.

This type of procedure was changed when the HVCC was started. It required the appraisal to be ordered by the lender or an appraisal management company (AMC) using appraisers on their panel.

When getting a mortgage loan for a home purchase or refinance it is important to find out the lender’s policy on who can order the home appraisal. Most of the time they will need to order it themselves and if that is not the case they will tell you an acceptable way to do it. As I stated previously, if you order it yourself  you may be stuck with an appraisal you cannot use.

Pre-listing or marketing appraisal

A pre-listing, or marketing appraisal, is used to arrive at a list price for a home you want to sell. This type of appraisal is used by the homeowner or seller for their own purposes, therefore they are the intended client. Because of this it is okay for them to order the home appraisal.

A pre-listing appraisal is owned by the person who orders it, which is most likely the owner of the property. They can use it to set a list price for their home and for verification to potential buyers that the asking price is valid. When buyers know that the asking price was based on a home appraisal, and not just a number that the seller wants, it will give them the reassurance that the likelihood of the deal falling through due to a low mortgage appraisal is reduced.

Before HVCC it was possible to use this appraisal for the purchase as well. It would involve revisiting the property to verify that everything was the same as during the initial appraisal inspection. An “update” appraisal would consider any new sales that had occurred between the original appraisal and when it went under contract. This type of scenario is no longer possible so it is important to know that this type of home appraisal is for the sole benefit of the seller and cannot be used by any future lender.

Appraisal for divorce purposes

Ordering an appraisal for divorce purposes is a tricky situation. Most people think that it is okay for one of the involved parties to order the home appraisal themselves, however they should consult with their attorney.

The main reason for doing this involves the process of discovery. Discovery allows an attorney to obtain the appraisal that was ordered by the opposite party to be used to the benefit of their client. It’s quite possible that the information contained within the home appraisal report may benefit their client.

To prevent this from happening it is better to have the attorney order the home appraisal, and have them shown as the intended user and client. By doing it this way all of the information contained within the home appraisal report will be considered confidential and will only be used by the attorney who ordered it.

Conclusion

As you can see it is more important than you might think for the correct person to order a home appraisal. By not doing it the correct way it can cost you money or leave you with an appraisal that cannot be used.

Question

Do you have a situation where you’re not sure if you should order the home appraisal? Do you have a story to tell that might be beneficial to others? Leave a comment below and as always thanks for reading.

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Comments

  1. Nice job, Tom. I find unless it’s a hard money loan, the lender really doesn’t want the buyer or owner ordering an appraisal. Here and there I do some hard money appraisals though, and those have been ordered directly by someone involved in the transaction without a middle-person or group.

    • I have had some instances of the same thing Ryan but for the most part I find that most lenders use either a different department within their company or an AMC.

  2. I like the way you covered this topic of who can order and appraisal and when. Great job. I still get a call every couple days of someone wanting to order an appraisal before they go talk to their lender for a refinance. I always have to explain, that I can do the appraisal, but the lender will most likely (unless it is a special type of unconventional loan) still need to order another appraisal and there is no guarantee that the other appraisal will have the same conclusion that I do.

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