How are appraisals ordered? How much time are appraisers actually given to finish the report? What is it like on the appraisers’ side of things? Let’s take a look at what happen before, during, and after an appraisal is ordered for a loan. Knowing how things work can foster informed conversations and help everyone plan for an effective escrow too. I hope this helps.
My Interview on CBS: By the way, last week I was interviewed by CBS to talk about housing trends. Click here to see the video or scroll to the bottom of this post.
NOTE: The info below is relevant only for how appraisals are ordered in the lending world. Private appraisals do not require use of an AMC.
Before the Appraisal Order:
- Appraisers typically have to be on an approved list for an Appraisal Management Company (AMC) to be sent appraisal orders. Appraisers apply to be on such a list, submit a resume, a few work samples, etc… In case you don’t know what an AMC is, according to NAR, an Appraisal Management Company (AMC) works with lenders and appraisers to facilitate the ordering, tracking, quality control and delivery of appraisal reports.
- The AMC puts together a list of what they expect from appraisers. Sometimes the list is just one paragraph, but other times it might literally be three pages long of what they expect on the inspection, or how the appraiser should handle certain situations if they arise. When the order is sent to the appraiser, this list is attached along with the order.
The Appraisal Order:
- When an appraisal is needed, an AMC will order one from one of their approved appraisers. If there is not an available appraiser on their list, the AMC will try to find an appraiser to add to their list.
- Some AMCs will send out a blast order to a large group of appraisers. Typically the fee is very low and the turn-time is very quick. The first appraiser to click on the order is the one who gets it.
- Other AMCs or appraisal departments will send out an order to a specific appraiser, and give the appraiser anywhere from several to 24 hours to accept the order.
- Appraisers are regularly given about 7 days to finish an appraisal, though some AMCs may require 3-5 days.
- If the appraiser doesn’t like the fee or turn-time that is offered, the appraiser can negotiate for a different fee and deadline. Some AMCs listen to appraisers and approve higher fees as needed, whereas other AMCs are bottom feeders only searching for the cheapest and fastest service.
- An appraisal is usually due no later than a specific time such as 12pm, 1pm, or by midnight of the given due date.
- A rush fee might result for an appraisal that is due several days prior to the normal turn-time or even just one day.
During the Appraisal Order:
- AMCs usually want the appraiser to call to set the inspection within the first 24 hours of accepting the order.
- Once the inspection is set, the appraiser has to update the AMC’s online appraisal platform with the inspection time.
- The appraiser is usually required to give status updates every 24 or 48 hours.
- The ordering platform can actually track how well an appraiser communicates and whether deadlines are met, which can result in more or less work for the appraiser.
- The appraisal might be due in 7 days, but if nobody can give the appraiser access until day 6, the appraiser is likely going to ask for several more days to complete the assignment.
- If the property ends up being more complex, the appraiser may need additional time or even a fee increase.
- The appraiser can access the purchase contract and other provided documents in the AMC’s online portal. Keep in mind the appraiser only has access to whatever documents are there though (usually the purchase contract, but rarely the pest report, TDS, or title report).
- INVOICE: Many AMCs require the appraiser to NOT include the invoice with the appraisal. There can be a big difference between what the Borrower is paying for the appraisal and what the appraiser is actually getting (this point was added thanks to an appraiser who emailed me).
After the Appraisal Order:
- The appraiser is thanked profusely and lauded with praise by everyone involved in the transaction (kidding).
- An AMC’s review department will look over the appraisal and ask the appraiser for any clarification or additional comps if needed. Appraisers typically are asked to complete revisions in 1-2 days.
- If deemed necessary, the lender may hire a second appraiser to do a second appraisal when a house is complex, the value is suspicious, or the house has been flipped recently.
- Most lenders have a rebuttal process, and the appraiser will typically be given 2 days to look at any new information or data that is submitted for the appraiser to consider.
- Appraisers are usually given a 2-3 day turn-time for a re-inspection.
- Appraisers are often paid between 30-60 days of doing the appraisal. It depends on the client.
Three Important Considerations:
- Backed-up AMC Communication: Appraisers are often blamed for a slow escrow, but in reality an appraiser might hit all deadlines that were given without being tardy. The problem is that a loan officer might submit an order to the appraisal department, but the appraiser might not actually see the order for a few days if the ordering department is backed up. Moreover, if the appraiser is dealing with a complex issue and reaches out to the AMC for conversation or direction, but it takes the AMC four days to respond to the appraiser, it can certainly delay things. The same thing happens when appraisers request documents that should be easy to get, but they end up taking many days.
- Remembering the Past: I remember working in an appraisal office in 2002 and at the peak of the busy season we had a 4-week turn-time, and we would do 2 or 3-week “rushes”. The turn-time was simply longer because that was the market at the time. It seems right now we are locked into a much faster turn, which is nice, but when the market gets hot, that may need to change.
- Picky Appraisers: When appraisers are overloaded with work, many appraisers might say NO to appraising a complex property. This means an AMC might have to reach out to many appraisers before finding someone willing to take on the assignment (hint: pay the appraiser for the additional complexity as money tends to talk). For instance, a 7-day turn time in the beginning of the year was actually not enough time for many appraisers because they were backed-up with so many other appraisals. Thus when both an easy order and a very challenging order would come into the appraiser’s pipeline, the obvious choice was to take the easier route because the hourly rate would be far better than how much more time it would take to complete the complex appraisal (that makes sense, right?).
My Interview on CBS:
Questions: Any thoughts, stories, or points to share? Agents, does anything surprise you here? Appraisers, did I miss anything? I’d love to hear your take.
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I like how you noted appraisers being picky about orders they accept right now. I have AMCs calling me and begging me to take complex assignments. I’ve even had a few borrowers call me and say that the lender told them they cannot find an appraiser willing to value their home and that if they can find an appraiser to let them know.
Thanks Gary. Yes, that sounds incredibly familiar. I had some very frantic calls over the past two quarters also. This dynamic will change once the market slows down of course, but when things are very busy, appraisers are going to pass on low-fee complex assignments. Bottom line. It just doesn’t make any sense for the appraiser, and unfortunately this ends up extending escrows. But the real story is that AMCs need to pay better fees for complex properties. Additionally, the appraisal industry is an aging industry, so turn-times are bound to get longer unless trainees can enter the field more readily. Lenders are going to need to loosen their stance on trainees not signing reports and such if they want faster turns (just a heads-up for any lenders reading…. the writing is on the wall).
I have seen several articles on the shortage of appraisers, I often wonder whether they mean a shortage of “cheap” appraisers? Good review of the process, of course banks are exempt from this process although several own their own AMC’s. Also numerous appraisers, including myself are attempting to move away from the lending process due to the hassle of the system.
Thanks Mark. I know in California we used to have 18,000+ appraisers, but I believe it’s closer to 11,000 now. Granted, there were probably too many at one time, and now maybe it’s more balanced (though it’s hard to say what the optimal number of appraisers is). When considering many appraisers are approaching retirement age, and there are hurdles to enter the field, this is a relevant point for the real estate community to be watching. But with most things, we often tend to not take action unless we begin to experience the consequences. We shall see how everything plays out. I think many appraisers have your mindset of diversifying work to avoid some of the headaches of the AMC process.
About the same ratio of decline in AZ (1/3). It would be interesting to know the exact cause of the decline. Probably a mix of increased regulations, loss of business, age and a dearth of new appraisers coming into the biz. This may be an unintended consequence of regulatory action, have never seen reg’s reduced once they have been put in place, thus something will have to give eventually.
Interesting. I think the comparison to real estate agent numbers would be very key too. My understanding is the number of agents is down from the top of the market, but it’s been increasing as the market has been improved.
There may be a relationship in the decline of independent mortgage brokers as well.
This article addresses mainly lenders that use AMC’s. Fortunately there are some excellent lenders that do not use AMC’s but rather have a panel of independent appraisers overseen by an in house appraisal department. These lenders tend to only use the more experienced appraisers, pay more and do not require constant monitoring of the appraiser’s they use. Makes sense, use more experienced and reliable appraiser’s, pay them a reasonable fee and not expect constant updates, rather a quality report by the due date.
The AMC’s expecting quicker turn times and constant updates are a big part of the problem. Having constant disruptions to a process that requires a lot of research, analysis and concentration causes more errors.
Several of the largest banks will only use the appraisers that will work for very low fees and as a result see more corrections and review needed to get a usable product.
While there is a shortage of appraisers in some areas, most of California is not in this situation and certainly Sacramento still has more than a sufficient number of appraisers at this time.
One item not mentioned that often slows down the appraisal process on a sale is the lack of a fully signed sales contract. If the agent sends the lender a partially signed contract the appraiser needs to request the fully signed/executed sales contract. Depending on the system of ordering used this can add days and I have seen weeks in getting the proper signed contract to be able to do the job.
Being sure we each are diligent in providing our piece of the appraisal puzzle will allow for a much smoother process.
Very well stated, Cynthia. I appreciate it. I would say the in-house appraisal departments are far better, and those are the only panels I have belonged to over the past few years for lender work. I will say the process tends to be very similar though still when ordering an appraisal, though a good appraisal department won’t try to babysit the appraiser and expect updates every single day (and that is very much seen in some of the bad AMCs). Moreover, in-house appraisal operations tend to have a local panel and pay reasonable fees too, which is a far better model. The challenge of any mass-appraisal ordering system is to realize real estate is very unique, and square properties don’t fit through the round hole every time so to speak. This is why an AMC or in-house appraisal department needs to be understanding of what appraisers are doing without trying to impose certain guidelines on each property that just won’t make sense for every property (this includes fees and turn-times). I completely agree about the executed purchase contract. It has to be signed by both parties. I have also seen this delay things, and it can be frustrating to have to wait for the document.
Ryan, I would appreciate your take on the new FHA reg’s. Several appraisers in my market have determined they can no longer do FHA appraisals after Sept 1; due to the inability to meet the new guides and the added liability associated with the new guides?
Hey Mark. I’m honestly not up to speed yet on all the changes. I plan to read the updated guide very soon and come to some conclusions. I’ve heard some appraisers freaking out, whereas others are saying no biggie. It’s been a hectic few months of life with a recent move and building a new office too. I’ll tackle this soon. I’m always game to hear your take of course too. Thanks.
I have a synopsis of the changes from a Flagstaff appraiser, basically added crawl/attic inspection that are practical impossibility, etc.
Thanks Mark. I’ve heard echoes of the “full” inspection. It seems a bit ambiguous, so I’m looking forward to gaining some clarity. It’s interesting to watch HUD make decisions over the past few years. They seem to be building roadblocks to obtain FHA financing, yet FHA loans in my area at least have persisted to increase because they are meeting a felt need (affording the market, putting little money down). From an appraisal standpoint maybe they want to get back to some more rigid roots?
Very good review of the process Ryan. I think this is a good article for homeowners to read so they understand what to expect.
Thank you very much Tom.
I have heard that the way you turn down the order from the AMC will determine if they send you more orders or not or put you further down on their lists. Do you know how to turn down or decline orders to ensure you stay in the AMC’s good graces?
Hi Sara. I have wondered that myself, though I’m really not certain. I know AMCs gauge turn-time and such, though they are obviously keeping track of orders that are accepted and declined too. I’m not sure if they have some sort of a grade for that type of thing, though it would be petty if they do. Such is the climate of AMC work in today’s market though. I just know anyone who wants to give a grade for something like that is not a good client for me. I only do work for a small number of good lender clients, though I will say I have successfully weeded out any AMC client that even remotely gave off this “score card” vibe. I just don’t want to do business with companies where it feels impersonal, there is nobody there to talk about valuation issues, the fees are low, and the expectations are too high. If you like the client, I think the answer can only be find by testing the system. See if a client keeps sending you work if you keep declining orders. If it makes a difference, maybe it’s a big deal. If it doesn’t, then I suppose you have your answer that it is not an issue. Let me know what you find.
Thanks so much for the comment. Your insight and thoughts are always welcome here.