A Behind the Scenes Look at the Appraisal Process

This article was originally published HERE for more articles from Ryan Lundquist you can visit sacramentoappraisalblog.com.

How are appraisals ordered? How much time are appraisers actually given to finish the report? What is it like on the appraisers’ side of things? Let’s take a look at what happen before, during, and after an appraisal is ordered for a loan. Knowing how things work can foster informed conversations and help everyone plan for an effective escrow too. I hope this helps.

My Interview on CBS: By the way, last week I was interviewed by CBS to talk about housing trends. Click here to see the video or scroll to the bottom of this post.

NOTE: The info below is relevant only for how appraisals are ordered in the lending world. Private appraisals do not require use of an AMC.

Before the Appraisal Order:

• Appraisers typically have to be on an approved list for an Appraisal Management Company (AMC) to be sent appraisal orders. Appraisers apply to be on such a list, submit a resume, a few work samples, etc… In case you don’t know what an AMC is, according to NAR, an Appraisal Management Company (AMC) works with lenders and appraisers to facilitate the ordering, tracking, quality control and delivery of appraisal reports.
• The AMC puts together a list of what they expect from appraisers. Sometimes the list is just one paragraph, but other times it might literally be three pages long of what they expect on the inspection, or how the appraiser should handle certain situations if they arise. When the order is sent to the appraiser, this list is attached along with the order.

The Appraisal Order:

• When an appraisal is needed, an AMC will order one from one of their approved appraisers. If there is not an available appraiser on their list, the AMC will try to find an appraiser to add to their list.
• Some AMCs will send out a blast order to a large group of appraisers. Typically the fee is very low and the turn-time is very quick. The first appraiser to click on the order is the one who gets it.
• Other AMCs or appraisal departments will send out an order to a specific appraiser, and give the appraiser anywhere from several to 24 hours to accept the order.
• Appraisers are regularly given about 7 days to finish an appraisal, though some AMCs may require 3-5 days.
• If the appraiser doesn’t like the fee or turn-time that is offered, the appraiser can negotiate for a different fee and deadline. Some AMCs listen to appraisers and approve higher fees as needed, whereas other AMCs are bottom feeders only searching for the cheapest and fastest service.
• An appraisal is usually due no later than a specific time such as 12pm, 1pm, or by midnight of the given due date.
• A rush fee might result for an appraisal that is due several days prior to the normal turn-time or even just one day.

During the Appraisal Order:

• AMCs usually want the appraiser to call to set the inspection within the first 24 hours of accepting the order.
• Once the inspection is set, the appraiser has to update the AMC’s online appraisal platform with the inspection time.
• The appraiser is usually required to give status updates every 24 or 48 hours.
• The ordering platform can actually track how well an appraiser communicates and whether deadlines are met, which can result in more or less work for the appraiser.
• The appraisal might be due in 7 days, but if nobody can give the appraiser access until day 6, the appraiser is likely going to ask for several more days to complete the assignment.
• If the property ends up being more complex, the appraiser may need additional time or even a fee increase.
• The appraiser can access the purchase contract and other provided documents in the AMC’s online portal. Keep in mind the appraiser only has access to whatever documents are there though (usually the purchase contract, but rarely the pest report, TDS, or title report).
• INVOICE: Many AMCs require the appraiser to NOT include the invoice with the appraisal. There can be a big difference between what the Borrower is paying for the appraisal and what the appraiser is actually getting (this point was added thanks to an appraiser who emailed me).

After the Appraisal Order:

• The appraiser is thanked profusely and lauded with praise by everyone involved in the transaction (kidding).
• An AMC’s review department will look over the appraisal and ask the appraiser for any clarification or additional comps if needed. Appraisers typically are asked to complete revisions in 1-2 days.
• If deemed necessary, the lender may hire a second appraiser to do a second appraisal when a house is complex, the value is suspicious, or the house has been flipped recently.
• Most lenders have a rebuttal process, and the appraiser will typically be given 2 days to look at any new information or data that is submitted for the appraiser to consider.
• Appraisers are usually given a 2-3 day turn-time for a re-inspection.
• Appraisers are often paid between 30-60 days of doing the appraisal. It depends on the client.

Three Important Considerations:

1. Backed-up AMC Communication: Appraisers are often blamed for a slow escrow, but in reality an appraiser might hit all deadlines that were given without being tardy. The problem is that a loan officer might submit an order to the appraisal department, but the appraiser might not actually see the order for a few days if the ordering department is backed up. Moreover, if the appraiser is dealing with a complex issue and reaches out to the AMC for conversation or direction, but it takes the AMC four days to respond to the appraiser, it can certainly delay things. The same thing happens when appraisers request documents that should be easy to get, but they end up taking many days.
2. Remembering the Past: I remember working in an appraisal office in 2002 and at the peak of the busy season we had a 4-week turn-time, and we would do 2 or 3-week “rushes”. The turn-time was simply longer because that was the market at the time. It seems right now we are locked into a much faster turn, which is nice, but when the market gets hot, that may need to change.
3. Picky Appraisers: When appraisers are overloaded with work, many appraisers might say NO to appraising a complex property. This means an AMC might have to reach out to many appraisers before finding someone willing to take on the assignment (hint: pay the appraiser for the additional complexity as money tends to talk). For instance, a 7-day turn time in the beginning of the year was actually not enough time for many appraisers because they were backed-up with so many other appraisals. Thus when both an easy order and a very challenging order would come into the appraiser’s pipeline, the obvious choice was to take the easier route because the hourly rate would be far better than how much more time it would take to complete the complex appraisal (that makes sense, right?).

My Interview on CBS:

Questions: Any thoughts, stories, or points to share? Agents, does anything surprise you here? Appraisers, did I miss anything? I’d love to hear your take.

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