Did you know when appraisals are performed as part of a lending process, it is the lender, not the borrower, who is the client. While the borrower pays for the appraisal, as part of the loan process fees, the purpose of the appraisal is to assist lender in making collateral risk decisions.
It is only when an appraisal is not directly tied to a loan or a refinance, that the home or land owner is the client.
Knowing who the client is, is important especially if/when a Reconsideration of Value is wanted/needed. Something largely misunderstood is that Realtors CAN communicate with appraisers directly before and after appraisals.
In May 2009, the Home Valuation Code of Conduct (HVCC) was adopted by Fannie Mae and Freddie Mac. The HVCC has caused some confusion with regard to who can communicate with appraisers and as well what can be communicated. Effectively, the HVCC eliminated lender ability to have direct communication with appraisers. Today, lenders work through third-parties who choose appraisers from their lists of approved appraisers. Of course, working through a third party can increase appraisal costs as both the appraiser and the third party want to be paid.
Property owners are able to hire an appraiser directly when the appraisal is not directly related to a loan. This can be less expensive because there is no requirement for a third party. With the markets changing, more and more homeowners are considering having appraisals completed during the listing period rather than waiting until a contract is in place. The following are some reasons to consider doing so:
1.) To shorten market time: Some property owners over-value their properties in an effort to maximize profits and/or “not leave money on the table.” Often times property owner values are more “subjective” than “objective.” Property owners often have both emotional and financial attachments to their properties. When an appraisal is performed in advance of a contract there is little question as to whether the property is really priced within the market. Being priced within the market, helps to reduce days on market.
2.) To avoid lending issues at the time of a contract: Non-cash transactions all have contingencies that both a borrower and the property must meet requirements. The property meets financial requirements through the appraisal process. When a property doesn’t appraise, often the transaction must be renegotiated or fails to close all together. And when it fails all together, it may be that the seller must reduce the price to get the next contract in place.
The cost for a seller to obtain an appraisal may be less than for a borrower as he/she can work directly with appraisers. And, the relatively small cost may decrease time on market. Less time on market may equate to monies saved.
Bryce and/or Nola of the Jones Group at Sunriver Realty would be glad to discuss the appraisal component of property transactions and any other aspects of buying or selling properties in the central Oregon markets with you. Please call, email, or contact us through our website. We are also able to provide contact information for local vendors including appraisers.
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This information is deemed reliable but is not guaranteed by agent or brokerage and is subject to change.