The Complete Breakdown of Home Appraisals Los Angeles Lenders Rely On

When you borrow money to buy or refinance a home, the lender wants an independent opinion of the property's value, because the property secures the loan. The Consumer Financial Protection Bureau explains that an appraisal is a written document showing an opinion of how much a property is worth, and that your lender may need a new appraisal and may require you to pay for it.

That is the reason the appraisal is separate from the sale price. A price is what two people agree on. An appraisal is a third party's evidence of value, built from the property and from comparable sales.

The Consumer Financial Protection Bureau lists three. An appraisal is a valuation by a licensed appraiser, and the Bureau describes it as the most common. How much of the property the appraiser sees depends on the assignment: Fannie Mae's desktop appraisal option, for example, does not require the appraiser to inspect the property in person. A broker price opinion is an estimate from a real estate professional. An automated valuation model is a computer-generated value from mathematical models.

Different valuations can differ, because they may rely on different comparable sales, be completed at different times or serve different purposes. If you receive two numbers, compare the dates and the purposes before you decide that one is wrong.

For a typical first-mortgage home loan, the lender must generally give you a copy of the appraisals it obtains promptly, and no later than three business days before closing or account opening, under the Consumer Financial Protection Bureau's Regulation B. You can waive that timing in the situations the rule allows. You cannot be charged a fee for copies, although the lender may charge a reasonable fee for the cost of preparing the appraisal.

Read the report when it arrives. Look at the comparable sales, the date of each sale and the adjustments, and check the description of your home for errors, such as wrong square footage or a missing feature.

A report names the property, the effective date and the intended user, then lays out the evidence for the value. The Fannie Mae Selling Guide is one example of what a mortgage program expects. For loans sold to Fannie Mae it requires at least three closed comparable sales and the data source of each sale. Those are mortgage-program requirements and not rules for every appraisal, so do not assume they describe any other assignment.

The Consumer Financial Protection Bureau says that if an appraisal comes in well below the offered price, a buyer may consider renegotiating the price or reviewing the appraiser's work carefully to understand how the value was reached. A buyer may also obtain an independent appraisal, though it may cost extra. The buyer's next steps are set out in why homebuyers need an appraisal. Start with the report: identify the comparable sales and ask whether they match your home.

Can I order my own appraisal during a mortgage application? The Consumer Financial Protection Bureau says you may obtain an independent appraisal, though it may cost extra. Tell the lender before you rely on it.

Does the lender share the appraisal? For a typical first mortgage, yes. You are entitled to a copy of the appraisals your lender gets.

Is an automated value enough for a lender? Some lenders use one in some situations, and Fannie Mae also lets lenders sell certain eligible loans without an appraisal under its value acceptance option. The Consumer Financial Protection Bureau lists an automated value as one of three kinds of valuation, with the appraisal as the most common.