In an industry that is so reliant on positive relationships between originators and their customers, it’s surprising how many lenders fall short of providing great customer service at the time of the appraisal. Some don’t consider this their job, and that misconception can be costly.
The appraisal is a critical part of the mortgage origination process, and therefore an important opportunity to cement a good relationship with borrowers. Since most borrowers don’t fully understand what’s involved in the appraisal process, a savvy loan officer is wise to educate customers on what they can expect when getting a home appraisal. Providing these insights to customers will help establish the loan officer as a seasoned pro.
So here are eight steps to take when explaining the appraisal process to borrowers:
- Explain the process
You should start by letting the borrower know you are required to obtain an appraisal by an impartial and unbiased appraiser for use as the primary tool for assessing the property’s value for collateral. A visit to the home by the appraiser is an important step in preparing the final written appraisal report.
If your client wants to observe the appraiser’s work, consider the client’s availability and explain that there is no standard time for an appraiser to perform their task. Things like the property’s size and complexity can influence how much time the appraiser needs. At a minimum, your clients should allow for one hour out of their schedule.
- Identify appropriate comps
Though it’s not necessary, if your client is aware of nearby properties that have been sold or listed for sale, you may suggest that they create a list and be ready to provide it to the appraiser. Completing a list ahead of time is convenient for everyone. Explain that while an appraiser cannot be influenced, providing relevant data can often be helpful.
- When the appraiser arrives
Most appraisers will introduce themselves and share a form of ID. It’s important to note that many states have eliminated actual appraisal license cards, so the ID may be a current driver’s license. Make sure your client knows to ask for an ID if the appraiser does not automatically provide it. (Valuation Partners tries to provide a current photo of the appraiser, as well as the type of car the appraiser drives and its color.)
- Interior views of the home
If the appraisal is for a refinance or a second mortgage, you can suggest that your client can accompany the appraiser inside the home, as there may be questions or information they can provide that assists in the valuation. However, you may want to tactfully explain that the appraiser needs personal space to accurately and effectively do his or her job.
The client should be aware that the appraiser is required to photograph all interior rooms as well as complete a floorplan of the property. All rooms must be viewed, but if a blueprint of the home is available, your client should let the appraiser know. Clients should also mention any updates, repairs, or recent additions they’re aware of, and if proper local permits were obtained for these changes.
- This is not a home inspection
The borrower should be aware that the appraiser is not a home inspector. The appraiser is there only to prepare an accurate value report on the property. Of course, there can be physical, structural, or mechanical details that will affect the home’s value, and the appraiser will make note of them. If any problems are disclosed on the seller’s disclosure, the client should make the appraiser aware of them.
- FHA properties
FHA properties have different rules when it comes to appraisals. If FHA financing is involved, you can inform your client that a viewing of the attic area is required, and a ladder should be made available to the appraiser if needed. FHA loans also require the appraiser to confirm that the furnace, hot water source, range, disposal, and dishwasher are all in acceptable working order.
- Exterior views
Most appraisers conclude their walk-through by viewing the exterior of the property. Photos of all sides of the property are required, along with any detached structures and special features such as pools. If there are any nearby amenities – pools, tennis courts, etc. - these should be mentioned as well. If the home has a crawl space, the appraiser should know how to access this space.
- Once the appraisal visit is over
It’s a good idea to let clients know that the appraiser will not be able to tell them the value of the home after the walk-through—they are only collecting information. After the viewing, the appraiser will obtain more data followed by a detailed process of analyzing all relevant information. Make sure borrowers understand that when the written report is ready, it will be sent to you to go over it with them. If they ask why the report comes to you and not them, explain that Federal banking regulations mandate that appraisal reports are sent to the lender regardless of who pays for the appraisal.
Your appraisal partner should be able to tell you or your client, if necessary, what happens and what to expect during the appraiser’s visit, so they are prepared. Being able to provide this information upfront to borrowers will not only help them understand the process, it will help ensure the appraisal goes smoothly.
To experience how Valuation Partners’ appraisals are performed, give us a call today at (281) 313-1571, or drop us a note at firstname.lastname@example.org. We’d love to hear from you!