Getting a home appraisal is an important part of the reverse mortgage process.
Here’s what you need to know so that you can manage your expectations about getting your home appraised as part of this loan to help you age in place.
It’s a multi-step process, but you can prepare in advance to make it as smooth as possible.
Typically, there will be three steps:
- The inspection. During the inspection, the appraiser will walk through the home with you and will take any necessary photos as part of the research process. He or she will focus on any areas that may be in need of repair, as well as specific features of the home that could contribute to—or take away from—its value.
- The research. Armed with photos and notes on your home, the appraiser will then conduct his or her own research to determine comparable home sales in your area.
- The appraisal. After tallying comparable sales and the complete picture of your home, the appraiser will deliver his or her appraisal to you and to your reverse mortgage lender. On the final appraisal, you will see all of the data used in determining the value of your home.
Once the appraisal is in hand, the lender can determine the amount you will be eligible to receive from your reverse mortgage loan.
The appraisal process has changed in recent years to introduce appraisal management companies (AMC) that typically handle much of the coordinating and communication that goes on between appraisers and homeowners.
They are the ones who accept the appraisal fee, then pay the appraiser from that fee to prevent the homeowner from paying the appraiser directly.
Part of the role of “AMCs” is to ensure the valuation is uncompromised—in other words, that there is no interaction between the appraiser and the lender to manipulate the valuation in favor of getting the valuation to a certain level.
There are a few things you can do in advance to help prepare for the appraisal and to manage your expectations accordingly. Many homeowners today look to online tools such as Zillow and Trulia, which offer estimates of home values for online users.
However, it’s important to recognize those estimates are merely that, and should not be taken for fact. The only way to get an actual valuation of your home is through a licensed appraiser.
Bear in mind the real estate market may have shifted dramatically since the last time your home was sold, and its value may have changed substantially. By being realistic about these changes, you can better manage your expectations for receiving your appraisal.
Fees, AMCs and Appeals
The appraisal fee, which currently runs between $450 and $550 depending on where you live, is paid to the AMC. The AMC will work with the appraiser to coordinate an appointment with you. Once you have ordered an appraisal, it can take from 15 to 30 days to complete the process, which includes scheduling, the appointment, the research and the final valuation.
Homeowners do have the opportunity to appeal an appraisal if they feel the valuation is way off base. However, only in a very small percentage of cases will an appealed appraisal result in a new valuation.
Tips when preparing for your home appraisal:
Be sure to have smoke detectors installed in all bedrooms and a carbon monoxide detector in a main living area. If your home is in California you will want to be sure earthquake straps are installed on your water heater.
Is an appraisal required to obtain a reverse mortgage?
Yes. A complete FHA appraisal is required to obtain a reverse mortgage. In some instances, a 2nd appraisal can be required as well. It is at HUD’s sole discretion whether a 2nd appraisal is required. If two appraisals are required, the lower of the two values will be used for the reverse mortgage calculations. Proprietary (Non-HUD insured reverse mortgages) can also require two appraisals, but only when the home value is at or above $2 million.
Can I choose who appraises my home?
No. All loans including reverse mortgages must adhere to Federal Appraiser Independence guidelines. Those guidelines stipulate that neither the homeowner nor the lender can select the appraiser who appraises the home. It must be performed by an independently selected qualified appraiser.
How long is the appraisal good for once completed?
The appraisal is good for 120 days from the date the appraiser inspects the home. In some instances, depending on market conditions a 30-day extension may be granted.
How much does an appraisal cost?
Appraisal costs will vary widely depending on several factors. The location, home size, value and amount of land influence the cost of the appraisal. Larger homes, larger lot sizes and rural properties have higher appraisal fees due to the complexity of the assignment. In order to determine the approximate cost for an appraisal of your home, you would need to obtain a quote from a lender.
What happens if I disagree with the appraiser’s opinion of value?
A homeowner is permitted to challenge the result of an appraisal. You can submit a request for reconsideration of value if you have 3 recent comparable sales that you feel are more comparable than the ones used by the appraiser. The appraiser is required to review those comparable sales presented and either utilize them or address why they cannot be used as a comparable. If there are no additional comparable sales, there is no recourse for a simple disagreement with the appraisal as the guidelines do not permit you to obtain another appraisal until the initial appraisal expires. Once the appraisal expires, you can start the loan application again and obtain another appraisal at that time.
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