How Does the Loan Type Affect the Appraisal?
You might think all appraisals are the same, but a buyer’s choice of financing has an impact on the appraisal process. It can affect who can perform the appraisal, the minimum health and safety standards the house must meet, and the cost of the appraisal. Use the information below to guide your client through the appraisal process.
Not all appraisers can perform every type of loan appraisal. Appraisers must be individually certified to perform conventional, VA and FHA appraisals. Your lender will typically order conventional and FHA appraisals from an appraisal management company. VA appraisals must be ordered directly from the VA.
While all appraisers must comply with Uniform Standards of Professional Appraisal Practice (USPAP) and appraisal regulations, VA and FHA appraisals will have more property requirements than conventional appraisals. A conventional appraisal is concerned only with determining the current value of the home based on its current condition. FHA and VA appraisals have two concerns: determining the current value of the home and making sure the home meets minimum health and safety standards.
A few minimum health and safety standards FHA and VA loans may require include:
- The roof must have at least 2-3 years remaining life
- No chipping, peeling or cracked paint on homes built prior to 1978
- Adequate water pressure and testing of hot and cold water
- All windows must open, close and lock
- No exposed studs or floorboards
- All stairs must have handrails
If you are representing the seller, being aware of all additional health and safety property requirements may assist you in advising the seller in case they wish to remediate any possible issues prior to the appraiser’s visit.
If you are representing the buyer, it is good practice to communicate with the lender regarding any repairs the seller may be making or, in the case of new construction, the completion status of the home so that your lender can order the appraisal at the appropriate time to comply with the health and safety standards above. If not, a reinspection may be required which will cost the buyer an additional fee at closing.
Prices will vary based on region, but FHA and VA appraisals typically cost more than conventional appraisals because of the extra standards that FHA and VA require. No matter the loan type, factors such as location, property type, size and any reinspections needed may affect the final cost of an appraisal.
Length of time the appraisal is valid
The length of time each appraisal is valid varies by loan type. FHA and conventional appraisals are typically valid for up to four months and VA appraisals up to six months. These dates are great to know in case the loan process or construction time becomes extended. FHA loans are the only type of appraisal that is attached to the home. That means if the sale of the home falls through and another FHA buyer offers to purchase the home within four months of the previous appraisal, FHA will reuse the previous appraisal. VA and conventional loan appraisals are attached to the borrower and are reordered for each new buyer.
Can I speak with the appraiser?
Yes, as the realtor, you can speak with the appraiser either in person or via written communication. Regardless of loan type, it is extremely important to inform the appraiser of any recent repairs, updates or renovations that may affect the value of the home prior to the appraisal. You can also provide any relevant comps you would like the appraiser to consider. For more recommendations regarding communication with an appraiser, check with your local Realtors association.
Written By: Marlene Sheard
Marlene is the mortgage marketing representative for Ameris Bank and previous sales and marketing president for her local Home Builders Association. She enjoys sharing her experiences for the buying, selling, and financing of homes.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.