Why Can a Mortgage Appraisal Take So Long?

A home appraisal is an important part of the homebuying process. While different from a home inspection, it’s an important part of the buying process and can impact a homebuyer’s ability to get a mortgage loan.

This article will explain how appraisals work during the homebuying process, why appraisal turn times can be longer than you might like, and how to provide homebuyers with strategies for addressing this issue.

What is a Home Appraisal?

As part of mortgage loan approvals, a professional appraiser analyzes and submits a report that presents an unbiased opinion of a property’s value. The appraiser will compare their analysis of the contract price to the prices of nearby homes that feature similar qualities to help determine whether the agreed-upon purchase price is fair.

Why Are Home Appraisals Necessary?

Lenders will use an appraisal report to ensure that the market value of the property meets or exceeds the actual closing price and the homeowner will have enough equity in the property. This is important because the lender can seize the property if a homeowner defaults on their loan and the lender needs to recover their losses.

You can ask if your purchase contract has an appraisal contingency that will halt the closing process if the appraisal is lower than the sale price.

How Does The Home Appraisal Process Work?

During an appraisal inspection, the home appraiser walks through and around the property, taking note of any aspects that might affect the value of the home, including needed repairs, structural integrity, property size, home square footage, car storage, and the surrounding neighborhood.

If you're a buyer, you won't really have too much of a chance to impact the appraisal visit. It is the seller's responsibility to make sure the property is properly maintained so it can be appraised at the sales price they are asking for.

On the other hand, if you're going through a refinance appraisal process, you should be certain your house is up to date on repairs and as presentable as possible, so your mortgage lender will be more likely to offer the refinance rates you're seeking.

How Is a Home Appraiser Chosen?

Mortgage lenders usually work with an appraisal management company to contract a third-party appraiser chosen at random from the company's roster. Selecting a real estate appraiser at random helps to reduce the odds of anyone involved in the transaction choosing their "favorite appraiser" to deliver a desired result.

How Do Appraisers Make Their Reports?

To prepare the appraisal report, the real estate appraiser integrates their notes from the property visit with additional data. The data used to complete the report can vary, as there can be more than one approach to conducting the appraisals.

Sales Comparison Approach

An appraiser using the sales comparison approach will compare the property condition and features to similar property transactions in the surrounding neighborhoods—often referred to as comps—and select the sales that are most similar to the subject property.

The appraiser will then make adjustments to those sales to account for the differences in features and condition as compared to the subject property. Finally, the appraiser factors in additional information regarding real estate market conditions and housing trends.

Cost Approach

Alternatively, the appraiser could use the cost approach. For this method, the appraiser calculates how much it would cost to purchase the property lot and build the actual property. By subtracting the depreciation of the home and any damage, they can arrive at a fair market value.

Income Approach

There is also an income approach, but this is usually limited to commercial properties, as it requires the appraiser to calculate the expected rate of return on the purchase.

Who Pays for a Home Appraisal?

The home appraisal fee is typically passed on to the buyer by the mortgage lender and paid upfront prior to the completion of the appraisal. The buyer can attempt to have the seller pay for the appraisal fee as part of the negotiation process, but it may be in exchange for some other consideration. It’s important to note that lenders cannot mark up the cost of the appraisal and must pass on the true cost to the buyer.

Can You Contest a Home Appraisal?

If you want to challenge a home appraisal, you can request a reconsideration of value from your lender. If you can show there were errors in the report or additional factors that should have been considered, then the appraiser might make an adjustment or at least provide further clarification about how they reached their conclusions.

There has also been some history of bias in the appraisal industry, which was officially prohibited by the Fair Housing Act and Equal Opportunity Credit Act. If you think you've been discriminated against during the appraisal process, there is a national hotline for filing complaints.

What Is The Reason For Slow Appraisal Turn Times?

One major factor causing appraisal delays is the lack of appraiser availability. There are simply not enough qualified appraisers to meet the demand, especially in more rural areas. Your property type may also play a role in the appraisal timeline.

Appraisal reports are also being scrutinized more now than ever before, due in part to the failures that led to the 2008 financial crisis. That means the next generation of appraisers are facing stricter standards.

A high-end or specialty property may also have a longer appraisal timeline. A complex property survey featuring unique amenities and extra features could be challenging to assess for an inexperienced appraiser. Isolated areas without nearby comparable homes could also add complexity, taking an appraisal turnaround time from days to weeks.

How Can You Manage Long Appraisal Times?

Ask your lender about the quality of their approved appraisers and their turn times. By doing so, you can help increase the likelihood that the appraised value is accurate and doesn't create delays that could put the entire deal at risk.

The best way to do this is to ask your lender the following questions:

• What is the average number of days for an appraisal report to be completed in the town I am buying?
• Will a local appraiser be used to appraise my property, or will it be an appraiser from a National Appraisal Management Company (AMCs)?
• Will the selection of the appraiser for my loan be filtered to only include appraisers with an expertise in the town I'm buying?
• Will the lender employ their own appraisal review to ensure accuracy?

While there is no way to guarantee that you will get accurate answers to these questions, it will help show your lender that you are an informed buyer with an expectation of excellent service.

The Bottom Line

Getting your home financing approved can be a stressful part of the homebuying experience, but the more information you have, the better equipped you can be to deal with the inevitable obstacles. While this article cannot get appraisers to improve turn times, hopefully it helped you understand why they're a necessary part of the homebuying process; potential reasons for delays; and how you can accommodate for any delays in your purchase contract, negotiations, and homebuying plans.