Hello Joy,Lenders typically require you to pay for the appraisal at the time the service is completed. The appraisal is a third-party service, and the appraiser's fee is due when the appraisal is completed, regardless of whether you decide to close the loan. If you change your mind, the lender would be responsible for covering the appraisal bill.Borrowers can cancel at any time without a cancellation fee, but if you authorize an appraisal, the appraiser has already completed their work and earned their fee once the report is done. By law, they are entitled to be paid. Lenders face the risk of having to pay the fee themselves if the borrower decides not to close the loan, which is why most originators require the borrower to pay for the appraisal when it is ordered.Some lenders, particularly larger ones, may use the appraisal as a way to hold onto the borrower. If the appraisal is completed by an appraisal company owned by the lender, the appraisal may become less portable. How does this affect borrowers? If you cannot close with the original lender or find a better deal with another lender later, your appraiser or appraisal company may not cooperate with the new lender. The new lender might need additional information from the appraisal, but the original appraisal company could refuse to work with them, preventing the new lender from closing your loan. Since an FHA appraisal stays with the property until it expires, this situation could prevent some borrowers from closing with another lender for up to four months. Many borrowers end up accepting less favorable terms from their original lender just to avoid excessive delays. What initially seemed like savings on a lower appraisal fee has cost many borrowers much more in the long run once they realized the terms they ultimately received were far worse than those they could have gotten elsewhere, but by that time, they felt trapped by an appraisal that couldn't be transferred and were limited by time.

Hello James,While your client cannot suggest a value under Appraisal Independence laws, he does have the right to rebut an appraisal that contains factual errors. The borrower has the right to submit his rebuttal to the lower appraiser requesting a reconsideration of value since the appraiser used invalid sales and supplied different sales information of similar properties that are actually similar to his home that had the appraiser used, which would warrant a different value conclusion. I'm honestly surprised that the lender didn't suggest this immediately when they saw the sales used by the two appraisers (unless there are other differences that are so egregious that they felt the appeal would not be successful). If all the sales for similar room counts are for homes that are much smaller, much older or the properties are extremely dissimilar in other ways, they may have already spoken to the management company and feel they do not have a good case. It's the borrower's right to rebut the value if he has the data to support his opinion that the appraiser erred (in this case, he used the wrong room count). The appraiser is not obligated to agree and alter his value. He may correct the appraisal and comment that a change in his opinion of value is not warranted. The borrower does not have to accept the value and close the loan either way, so he should ask the lender to help him rebut the value.

Hello Paula,I can shed a little light on your issues. Firstly, HUD has a manual for their first trust deed lending program that is over 1100 pages long for loans insured under their FHA insurance (HUD) loan programs, of which the HECM reverse mortgage is one and a separate manual for the appraisal portion dealing with properties and their valuation that is over 900 pages long. DE-designated (Direct Endorsement) underwriters can issue underwriting approvals for FHA loans. They must have sufficient years of experience and have underwritten enough loans that HUD has reviewed that they have been given this designation, but most still need to learn all the rules contained in these manuals that are ever-changing/updating. There is yet another separate manual, the HUD 4235, which contains all the information for the reverse mortgage program. It is virtually impossible to give advance notice to every borrower of every situation about them or their property that could affect their application. I do wish that it would be possible to have everything in one place that would be quick and easy to read and that would allow all borrowers to know if they and their properties qualified or had any issues without waiting for an appraisal, but it just isn't possible. HUD counselors are not lenders or appraisers, and therefore, they are warned NOT to try to tell borrowers about loans or appraisal issues so as not to assure them something is OK or scare them away from a loan for which they would otherwise qualify simply because they don't know the rules and give borrowers bad information.Here you will find the appraisal checklist we give to all borrowers at the application. It may have covered most of your issues. Still, HUD does not require this disclosure, so not all lenders offer the same help. We have originated and closed only reverse mortgages for 19 years, so we find that this helps as you can see by the checklist, it mentions chipping and peeling paint, exposed electrical wiring, unpainted wood surfaces, water leaks, staircases without handrails, and common roof issues. It also says it is not a complete list; it is just some of the more common issues we run into, but many more things have come up over the years that we could not put into this notice. Borrowers still have a choice when some of these items are pointed out in advance to keep from having to fix or repair them later. Painted surfaces can be painted quickly and easily in most cases with a small amount of paint from your local hardware store to avoid the issue of chipped and peeling paint (many paints contain lead, and HUD will not allow it). Bare wood allows for termites and other wood-destroying pests, so it is another concern by HUD. Suppose these conditions are corrected before the appraiser comes. In that case, it saves you some money on reinspection, so we point them out in advance. Some repairs cannot be done before the appraisal due to the scope of the repair, because of weather, the time it takes to have the repair completed, or possibly the cost of the repair. Luckily, most needed repairs can be made after the loan closes if the borrower needs to do that using a "repair set aside." This is where the borrower gets an estimate from a contractor of their choice for the repair. The funds are left in the loan at an amount of 1.5 times the cost of the repair and then disbursed after the repair is completed. Funds above the repair cost are freed up for availability to the borrower in accordance with the loan terms. Just about the only time a repair set aside is not allowed is when the repair is health and safety related, and that would include such things as no stair railings where someone could fall, mold that is unhealthful, exposed electrical wiring that could cause shock or fires, etc. Most repairs are completed after the loan closes, though, and from what you are telling me, it sounds like all of yours would qualify for a repair set aside as well.It really isn't feasible to ask all the questions that could come up in an appraisal, which is why HUD considers the appraiser their eyes and ears in the field. Your lender did not give you a checklist like the one we use, but it sounds like your loan officer was pretty good about pointing out items that an appraiser may include in his/her report. The may is an important distinction because appraisal is an art, not a science. There is no way to know if the appraiser will state that the items need repair or just note them or consider them in the condition adjustment when the home's value is tallied and let it go. If you plan to do the repairs anyway, you may want to let the appraisal be completed and let the chips fall where they may, knowing you might need to get those items repaired later or you may want to put a little paint on the areas you know need it. No one can tell you for sure in advance what will be required, and from what you are telling me you can complete the repairs after closing anyway (which I cannot guarantee you because I can't see any of it and I don't see an appraiser's comment).Oh, and to answer your last comments/concerns, HUD and the lender are not overly concerned with how you maintain your home and will not ever check it in the future for paint, etc., but they do reserve the right to make sure that their security for the loan is adequately protected (just as is the case with any other loan). They can require you to keep your taxes paid, your homeowner's insurance paid, and the home maintained reasonably. I agree that the reasonable manner could be more specific, but they do not want to start checking to see if you are mowing your lawn or pulling the weeds in your flower beds! They do want to be able to intervene, though, if the city were to post notices that you are about to be red-tagged because the weeds and brush are so overgrown and dead that they have become a fire hazard. Or in the case of one home I was involved with many years ago, the people let the pool go for so long that it became a "swamp," the city determined that it was breeding mosquitoes and was a health and safety violation. In those instances, the city or municipality can enter the property, board it up if needed and take further actions so the lender or HUD can enforce provisions in the Deed of Trust or Mortgage to require the borrower to maintain the home in a reasonable manner. This is the only time in 45 years I have ever seen HUD move on a property owner due to them not maintaining the home in a reasonable manner. As the lender, our inspector would not approach the home due to the "stench and insects" coming from the backyard. The neighbors kept calling code enforcement for the city, and HUD became involved after they posted the red tags.I hope this explains things for you. There is no reason to be angry; the maintenance items are there, and how you deal with them is up to you. If you can do them before the appraiser arrives, it might save you some time and a little cost later (if the appraiser needs to come out and reinspect the home to check for completion, there is a fee for that). If you need to complete them after the closing, it is possible, and a procedure is set up to accommodate your needs. Let me know if you have any questions.

Hello Marianna, The appraiser will take all of that into consideration when appraising the home. He/she must determine the overall condition of the home and then must also compare the condition of the home to the condition of the home as it relates to the other homes, he/she used when comparing the values. If your home is nicer than the other homes, the appraiser will give it a positive adjustment for the condition. If the other homes have all gone through extensive updating or remodeling that is superior to yours, there might need to be a downward adjustment to the prices at which they sold. Perhaps no adjustment at all will be required because those homes are also in good shape with new appliances and because you also have those amenities, the appraiser did not need to give you a negative adjustment (which means that you did get more value for the improvements than if you did not have them and the appraiser had to use a negative adjustment because the sales were in better condition).

Hello Paula, Appraisal is an art and not a science and the final number is an estimate of value. The difference you describe is exactly why HUD is requiring two appraisals in some instances. I don't know if it is a matter of one appraiser who is overly generous, one who is just that conservative or it one of the two made an error in some part of their report. If one of the appraisers used bad information (the wrong size home, different bedroom/bathroom count, used properties that were either significantly inferior or superior to the home they were appraising) then one of the appraisals contained errors and it is not just a difference of opinions and this is what HUD is concerned with. Theoretically, you are exactly correct. Two trained appraisers using the same data and the same HUD methods to determine value should not have such a wide opinion of the value of a given home unless there just are no comparable sales available and they are taking very little information and adjusting non-comparable properties as best they can. But when it happens that there is such a difference in reported values, HUD requires that the lender use the lower of the two values and unless the lower appraisal contains errors that the borrower can rebut, the lender is bound by the HUD rules to use that lower value. If the lower valued appraisal used homes that closed longer ago, were not similar homes, were farther away or had other factors that made the report less indicative of the true value of the property, then the borrower can rebut the value with the more recent and accurate information. What we see most often though is that the lower appraisal is one that uses mostly original properties (homes that are not highly upgraded and modernized/remodeled) and that is what the subject property consists of and the higher appraisal used sales that were mostly remodeled homes and tried to adjust their appraisal for the upgrades rather than finding similar homes that were mostly original. When this happens, there really are no grounds for rebuttal and the lower value usually stands based on HUD's requirements. If you have two appraisals that are that far apart, review both appraisals and have your lender help you determine which sales used in each appraisal are more similar to your home. Everyone, including the author of this response, has a bias when it comes to their own home. But look for errors, not disagreements. If the appraiser made mistakes, you have a chance to rebut their opinion of value if the correction of misstatements will result in a higher indicated value. If you disagree and think that your home is a better floorplan, has better landscaping, looks more appealing, etc., you will not be successful in your attempt.

Hello Susan, You can always rebut a value if you do not agree with the appraiser's information used as being the best available information (the appraiser use houses that sold 8 months ago that were 2 miles away and there were 3 house that sole on your block last week that were not considered) or if you feel the appraiser made a material error in the report (the appraiser said the home was a 2 bedroom 2 bath and it was actually a 4 bedroom 3 bath and 1,000 square feet larger than given credit for) but you cannot disagree with their value because you think your home is worth more. Let me explain with an example:If the next appraisal comes in at a lower value, HUD does require the lender to use the lower value of the two once the appraisal is finalized. But you can rebut the value of the appraisal if the second appraiser used older sales or less similar homes by suggesting different sales that are more similar or have sold more recently that would support a different value. You cannot suggest the value you want him/her to use, but if the sales data is available that shows homes that are more like yours do sell for higher prices and you can give them the sales to verify that fact, we have seen many times when borrowers have had appraised values increased because of an effective appraisal rebuttal. However, if all the other sales you use are larger, sold longer ago or are completely remodeled/upgraded and yours is all original and he/she used original comparable sales, then it is your opinion versus theirs as to which factors make the biggest difference in the sales price/value of the home and the appraiser is the license professional who does not have an emotional interest in the conclusion of value. The first appraisal was obviously flagged by HUD as needing a second appraisal for a reason and usually that is because the appraiser used excessive adjustments to come to their conclusion of value. If the appraiser had to use more adjustments than HUD allows to determine a value, then HUD feels that they did not use the similar properties and that a second appraisal was required to determine if there are better/more similar sales available and if that would change the opinion of value. That's why HUD limits the amount of adjustments an appraiser can make overall in the first place. HUD reviews all appraisals before the lender even receives them from appraisers now and so going to another company would not help you at all. The appraisals were logged into the HUD Electronic Appraisal Delivery (EAD) portal and all lenders must use the same appraisal until it has expired. Under the HUD rules (and HUD is governed by Congress), lenders may not even deliver an approval to borrowers until the appraisal has passed the EAD process. The appraisal is valid for 120 days and you can just let the appraisal expire then start over again then with a new appraisal, but you will again be subject to the sales at the time (including possibly another second appraisal requirement) and it will depend on what information is available to the appraisers to work with then.

Hello Lorit, We do not sell reverse mortgage loans to FNMA and the rules for the federally insured product originate from HUD. HUD put out guidance in their Mortgagee Letter on March 27th (Friday of last week) regarding appraisals that allow for "drive-by" and "desk" appraisals and we are certainly going to interpret that guidance and put it into our procedures. There are still a few questions regarding the HUD notice regarding the full process that will be required and when, but it is clear that their intention is to allow for the use of a procedure that does not include the appraiser entering the property for valuations completed HECM reverse mortgage loans until May 17, 2020. Jumbo reverse mortgage loans would be determined by the investors that offer the products. There has been no indication at this time that they have changed their willingness to allow for a drive by appraisal only. For the time being, they still require a full appraisal with an interior inspection. They may follow the HUD policy but if the full appraisals with interior inspections become unavailable, they could also suspend the programs until the appraisals are available once again. We do not have that information currently.

Hello James, Every lender must set up their own appraisal management procedures within their company in accordance with HUD rules and state laws. HUD rules since about 2010 under their Appraiser Independence Guidelines state that no originator or borrower can choose the appraiser. The lender can use a panel of appraisers if an employee who has no tie to production chooses the individual appraiser and the company uses strict quality control measures. Otherwise, most companies use Appraisal Management Companies who are supposed to be independent companies that perform this function and are not governed by the lender and takes the appraiser choice out of the hands of the lender so that the company is not required to maintain a panel throughout the nation. We do not perform appraisals and must order our appraisals from an independent management company. They choose the appraiser and we have no input into the choice in advance nor can we suggest a value in any way to that appraiser. This gives the appraiser complete autonomy to determine a value, free from lender or borrower input or pressure. That's the way it is supposed to work but unfortunately, some companies have found a way to corrupt this process as well and HUD is not helping the matter. Some larger lenders own all of part of the Appraisal Management Company (AMC) they use for the appraisals. This does not violate HUD's rules because the person at the AMC who chooses the appraiser has no tie to the production division of the company and therefore, no conflict of interest to try to inflate appraisals so HUD allows it. However, we believe this hurts borrowers and have written about how but will tell you again now. When a borrower chooses to later move to another lender, the original lender must transfer the Case Number under the HUD rules to the new lender. In other words, if you decide you are not getting the best service or loan terms later and decide you want to go to another lender, you should be able to transfer the HUD Case Number and the appraisal you paid for and complete your loan with a different lender under the more favorable terms, right? Not always so. Lender owned AMC's will not allow the appraisers to complete any additional work for new lenders if the appraisal contains any deficiencies and for some reason, it seems all appraisal transfers from lender owned AMC's do! It may just be the skeptic in me but it sure seems that the lender owned AMC's almost intentionally make errors and omissions knowing that they can correct them to close the loan but that they will only do so if it is their company closing the loan. We have gotten to the point that we require the borrower's copy of the appraisal before we will even consider a case transfer request from some companies due to the errors we know are always present and those companies' appraisers and we know that we will not be able to use the appraisals when the AMC's refuse to correct errors. This just angers borrower because neither the law nor HUD will require appraisers to correct errors and omissions, regardless of how egregious, from appraisals assigned to subsequent lenders. When you throw in the fact that HUD now requires a second appraisal in a lot of circumstances, borrowers may receive a request for a second or even 3rd appraisal if this should happen. Therefore, not only do we not get involved in other lenders' appraisals, we often decline to accept Case Transfers now for just this reason. I strongly suggest that you do all your homework in advance to be sure that the lender you choose is the one with which you want to complete the transaction before you start.

Hello Casey, You can always have an appraisal performed but I don't advise it unless it is in the course of a loan request and here's why. An appraisal is one person's opinion of value and it is a snapshot in time. The appraisal represents one appraiser's opinion of value based on the information he/she reviewed which led them to a value. There could be other information that they did not see or use that could lead another appraiser to another value or there could be other homes that sell the next week that could influence a higher or lower value. An appraisal is fine for lending purposes because you need the value to be established as of a certain date to decide, but the appraisal may start to become outdated as soon as the ink dries if more data becomes available. The lender will use it, but if you are making future that appraisal may no longer be valid for your purposes within a very short time. I suggest that you look online at recent sales and see what properties like yours in the area are selling for. This is the tricky part though, don't get emotionally invested in your research! If you see a house that has been completely remodeled from top to bottom and yours is not, or if it is quite a bit bigger, or has different bedroom and bathroom count, try not to use those houses in your estimate because an appraiser and a lender will not. Don't get caught in the trap of looking at all listings and think that your house is worth what other homes are listing for if none of them are selling for those listing prices. Try to find recent sales of similar homes to see what houses that have the same room count and square footage as your home, in similar condition have sold for. And don't think that if you do have a few upgrades that others do not, that will equate to more "value". If an appraiser can't find a similar home with those upgrades to justify a value for those upgrades, many times they cannot give them value. An example of this is an outbuilding that no other properties in your area have. It might be the best barn with all the goodies and it might be the best improvement you ever made, but if no one in the area has one and there have been no properties that have sold with a barn, the appraiser has no way to know what the average buyer would pay for such an amenity and may not be able to give it any value. Without a sale, HUD has no way of knowing if this is an over-improvement for the area and that it is not actually going to be a negative value not knowing if most buyers would have to pay to take it down. Enlist the aid of a local real estate professional. They can usually show you sales comparable (comps) relatively easily and don't mind doing so because they know that if they don't list your home today, they have made a contact for the future and hope that you will keep them in mind when you do want to sell. And then you can keep an eye on the for-sale signs that go up in your neighborhood and watch the online services when they do sell. We live in an information rich time. You can see what other homes sold for very quickly and you can see how long they are listed with no offers as well. All this information should give you a very good idea of your property's true value without having to pay for an appraisal.

Hello Dianna, HUD instituted a policy late 2018 that now requires appraisers to submit their appraisals to HUD through their electronic portal before it even goes to the lender. HUD, in its sole discretion, can now require a second appraisal if they have any issues with the appraisal, the value or the property. HUD is currently requiring a second appraisal on about 25% of all the appraisals it receives. HUD made the determination that they still believed they had value issues with the homes on which they received loans to insure. So they instituted this policy and lenders are not allowed to even give out a loan approval on the HUD HECM program until they have cleared the appraisal review process and that could mean one or two appraisals. Unfortunately, if borrowers start their loan with a lender that owns their own appraisal management company and later try to move to a new lender for a better deal, they can be even further dismayed by the process. Lender-owned appraisal management companies are now telling new lenders that they cannot address any conditions on the appraisal. Since most appraisals have some issues that requires either minor or sometime more major revision/correction, these management companies refuse to make corrections to the faulty work they provided making the appraisal worthless to the new lender and HUD sanctions this policy. If the new appraisal done is somehow kicked out by the HUD review as needing a new appraisal, then a 3rd appraisal is required! Unfortunately, the borrower and the lender have little to no control over this whole process. The moral of the story is that if you plan to use a company that owns its own appraisal management company, you really need to shop around and be sure you are getting the best deal up front. It may be too late after the appraisal has been completed unless you don't mind paying for another appraisal and waiting for another report to be completed.