Just like obtaining any loan, the process to get a reverse mortgage is exactly that – a process. And just like a regular “forward” mortgage, a reverse mortgage also requires you to get an appraisal on your home.
But, even in today’s tech-savvy world, it’s important to note that getting an appraisal on your home is far more in-depth than simply typing your address into a popular real estate site like Zillow, Trulia, or Redfin. As a matter of fact, the algorithms these sites use are typically not grounded in the same values and data that appraisers and mortgage lenders are required to use.
So, what exactly is the appraisal process for a reverse mortgage? And how long does it take? We’ve compiled a list of our most frequently asked appraisal questions to set the record straight.
- What factors are considered in a home valuation?
The biggest determining factors in determining the value of your home is sales data of comparable homes in your area. Prior to the actual appraisal, we encourage all clients and prospective borrowers to have an open-ended discussion with your Longbridge Loan Officer. While Longbridge is not an appraisal company, we do have access to important neighborhood data that gives us a pretty accurate idea of what your home’s appraisal value will be.
- How long does the appraisal process take? What is the timeline?
Once you’ve submitted your loan application, we submit it to our internal operations department. There, our intake team orders multiple services such as title work and another major component – the appraisal. Once our team has ordered the appraisal, a third-party Appraisal Management Company (AMC) steps in. Unfortunately, as a lender, our main role in the appraisal process is to simply order the services. The remaining timeline and process is up to the AMC.AMCs are currently in high-demand due to the current state of the housing market. This has caused delays in which case it’s entirely up to the AMC to determine how quickly your property can be appraised. In terms of the timeline, there are some examples where you may expect to see a longer than usual wait or potentially higher appraisal cost. For instance, if your property is deemed more “complex” such as in the event of a unique manufactured home with a trailer in the backyard, the appraisal may take more time. Similarly, if your property is located in a more rural area where there may not be as many appraisers readily available, you may expect a longer process or delay. While the appraisal process itself is out of our hands as a lender, we at Longbridge make it a priority to set the expectations with every borrower right from the start. We know that transparency is key. And we are here to answer any questions you may have along the way. Learn more about our commitment to service in our guarantee.
- What is the cost of the appraisal process?
When it comes to the appraisal process, there are two key costs – the cost of the appraisal itself, and the cost of the AMC. On average, this total tends to be in the ballpark of $625 for a standard Home Equity Conversion Mortgage (HECM). However, properties that are deemed “complex” or that are located in area where appraisers are scarce may incur higher costs. Once your appraisal report is completed, it is valid for 120 days. Another appraisal report cannot be ordered until the conclusion of this 120-day period.
- What happens if my appraisal comes in lower than anticipated?
If your home’s appraised value comes in lower than you expected, we are happy to review the appraisal report with you. We do always remind our borrowers that the appraised value is not just a number pulled out of thin air – each appraisal goes through three different rounds of quality assurance. First, the appraiser is required to on FHA’s approved appraiser roster and be properly licensed to appraise specific types of homes . They must follow U.S. Department of Housing and Urban Development (HUD) guidelines for reviewing each property to determine compliance with HUDs minimum standards. Next, the appraiser performs a thorough walkthrough of the property, researches the area and similar, recent sales and assigns a value to your home. Finally, once we receive the appraisal report here at Longbridge, we submit it to our department of underwriters for internal review. Here, we review additional data sources to ensure that the appraisal is within reason. While there is an option to dispute your appraisal, there are limited valid reasons to do so. The main reason for a dispute is for factual correction. For instance, if your home is 1,900 square feet, but the appraiser only listed 1,800 square feet, you could dispute to get credit for the extra 100 square feet. Similarly, if your home is 4 bedrooms and 3 bathrooms as opposed to 3 bedrooms and 3 bathrooms, you can dispute the appraisal for reconsideration based on the additional bedroom.
- Is a second appraisal ever required?
As an added layer of quality assurance, U.S. Department of Housing and Urban Development (HUD) may require second appraisals at random as a quality control method to ensure home values are not being inflated by appraisers. Unfortunately, the second appraisal is an additional expense – on average, $625. While we as a lender do not have any control in the second appraisal process, we are notified whether or not an additional appraisal will be required once we receive the first appraisal and upload it to the FHA system. At Longbridge, we make it a point to let our borrowers know if a second appraisal will be needed as soon as we find out.
- What can you do to expedite the appraisal process?
Your Longbridge Loan Officer will advise you on all the specifics you can expect from the appraisal process as well as any potential improvements you may want to make around the house ahead of time to expedite the process. As a general rule of thumb, you’ll want to make sure your home is kept in good condition and repair so that the appraiser can quickly and easily perform a thorough walkthrough of the property. The appraiser must be able to do a head-and-shoulders peek inside the attic and access any crawl spaces underneath the home, if applicable. Since the appraisal must disclose whether the home meets FHA minimum property standards, the appraiser will check that the stove, toilets, and heating units, among other things, are functioning during the property walkthrough. They will also look at each bedroom to make sure it has two points of ingress and egress – such as a window and a door – and assess whether there are any potential health or safety hazards in the home.If there are any issues with your home, it’s important to be upfront and honest from the start. Your Loan Officer can step in and help triage any issues prior to the appraisal. Whether you need to make some repairs or improvements to the home to bring it up to standard or need some additional time to tidy up clutter prior to the walkthrough, your Loan Officer is your trusted advisor to help you seamlessly navigate the process.
And there you have it – the most frequently asked questions about the appraisal questions.
Have another question we didn’t cover? We’re just a phone call away. At Longbridge Financial, we’re committed to providing trusted personal, professional support through each step of the loan process – including the appraisal. And although most of the appraisal process is the responsibility of the AMCs, our team of Loan Officers and consultants are here to help guide you however they can.