Changes With Appraisals

l-lake-oswego-mansionSomething is going on with appraisals these days and it is significant enough to impact the purchase or sale of a home if the sale involves a mortgage. There are two specific changes with one leading to the other.

Appraisals are taking longer

For pretty much my entire real estate career the time for an appraisal to be ordered and completed has typically been about 10 days. When things got busy, it may take a day or two longer. When things slowed down, it might come in more quickly. This quick turn around allowed buyers the luxury of completing all of their home inspections and having the certainty that the house is something that they wanted to buy, before they had to pay for an appraisal. No more.

I am experiencing appraisals that are taking a minimum of two weeks and I currently have an FHA loan being processed in which the appraisal took a full month.

Oswego-LakeWhat is causing this? It certainly has to do with the fact that we are in the peak of the selling season with an above average amount of loans being processed. But I think there is another factor. Just as qualifying for a loan has become more difficult, the appraisal process has tightened up. Appraisers have to factually prove the value based upon collateral. They can not fudge the numbers with things like “an upwardly trending market”. So where there may have been 14 offers and a bidding war to gain a sale, that does not mean that the house will appraise out. This is not about emotion. This is about factually proving the value.

Plan to pay for and order the appraisal within days of acceptance of your offer

This means that to have a closing within 45 days of acceptance, a typical time expectation, you need to pay for the appraisal right away. Buyers just do not have the luxury of waiting until after the home inspection. I suppose you could simply ask for a 60 day close to allow time to inspect before buying the appraisal. Good luck with that in this seller’s market. I am seeing sellers agents commonly write that the appraisal must be ordered right away as a part of the contract negotiation at the time of the offer.

So just a heads up. This change is having a pretty big impact on closing transactions. Plan ahead, get the appraisal ordered early, and close on time. This will make everyone happy.