When Does a Lender Order an Appraisal?

A property appraisal is a significant component in the mortgage lending process. It serves to establish an independent estimate of a property’s market value. This valuation helps to ensure that the amount of money being borrowed aligns with the asset’s worth, providing a foundational assessment for both the borrower and the financial institution.

Understanding the Appraisal’s Role

Lenders require a property appraisal as a risk management measure. This valuation ensures the property securing the loan offers sufficient collateral. If a borrower defaults, the lender must be confident that selling the property would recover the outstanding loan. The appraisal is an objective, third-party assessment conducted by a licensed professional independent of the transaction, ensuring an unbiased determination of value.

Typical Timing for Appraisal Orders

Lenders typically order an appraisal after the initial loan application stages are complete. This usually occurs once the borrower submits a full application and the lender conducts initial verifications, such as reviewing income and credit history. Many lenders wait until a conditional loan approval is issued before ordering the appraisal. This sequence confirms the borrower’s general eligibility before incurring the valuation cost.

For home purchase loans, the appraisal is generally ordered once a purchase agreement is signed by both buyer and seller. This signifies commitment to the property, allowing the lender to evaluate that specific asset. For refinance loans, the appraisal is ordered after the borrower’s application is complete and the property’s eligibility is confirmed. Timing can vary based on loan product (e.g., conventional, FHA, VA) and lender procedures. Borrowers are typically responsible for the appraisal fee, often $500-$700, which is frequently required upfront.

What Happens After the Appraisal is Ordered

Once a lender places an appraisal order, an independent licensed appraiser is assigned to the task. This assignment is often facilitated through an Appraisal Management Company (AMC) to maintain objectivity and prevent direct influence over the appraiser. The assigned appraiser then contacts the relevant parties, such as the real estate agent, seller, or borrower, to schedule a physical inspection of the property. This inspection is a step in the valuation process.

During the property inspection, the appraiser assesses various characteristics of the home, including its size, condition, features, and any recent improvements. They will measure the property, take photographs, and note any factors that might impact its value, such as structural issues or desirable amenities. Following the inspection, the appraiser conducts thorough research on comparable properties that have recently sold in the immediate area. This comparative market analysis, combined with the property’s specific characteristics, forms the basis for the comprehensive appraisal report.

The completed appraisal report is then submitted to the lender for review. A typical turnaround time from the order being placed to the report being delivered can range from 7 to 14 business days, though this can vary based on market conditions and appraiser availability. Upon review, if the appraised value meets or exceeds the purchase price or refinance amount, the loan process generally continues as planned. However, if the appraised value comes in lower than expected, it may require renegotiation of the purchase price or an increase in the borrower’s down payment to proceed with the loan.