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Arizona Home Appraisals / Appraisers
Do I need an appraisal of my home?
 In most cases, lenders need a professional, independent appraisal of the property you want to buy or refinance. The only exception to this rule is if you are borrowing a very small amount of money for a house that is worth much more or, sometimes, if you are refinancing with the same mortgage company. Again though, it is very rare that you will not need an appraisal any new mortgage loan.
An appraisal is usually your only "up-front" out-of-pocket fee in a mortgage transaction. The appraiser will always bill the mortgage company if an appraisal is not paid for, so the mortgage company will always insist that the client pay for the appraisal in one of three ways:
a.) Pays for the appraisal at the door (for a refinance);
b.) Pays the mortgage company in advance for the appraisal; or,
c.) Charges the client an "application fee" of $350 from the beginning.
We always ask the client to pay the appraisal company directly (option A or B). Beware of lenders that charge an "application fee." They are covering the appraisal bill in case you back out of the loan, but at the same time, will not be obligated to give you the appraisal in case you back out. After all, you did not pay for the appraisal; you paid an application fee. We never ask that our clients pay us for their appraisals- we would much rather have our clients deal directly with the appraiser.
How much does an appraisal cost?
Prices for appraisals (at least in Arizona) generally run from $300 - $400, but can go higher for very large homes. The appraiser needs to measure every single room and draw a diagram of the home, so it only makes sense that a 5000 square foot home will cost more to appraise than a 2000 square foot home.
We have used many different appraisal companies over the years and have found that they all seem to charge the same thing. It's almost like "price fixing." Last year, every appraiser that we knew of was charging $300 for a standard, Fannie Mae appraisal. This year, it seems that every appraiser is charging $350. You can always "shop around" for an appraisal, but we feel that you would be wasting your time. But speaking of shopping around for an appraisal, many clients ask us:
"Can I use my own real estate appraisal? I know somebody."
 As we mentioned above, the appraisal transaction is between you and the appraiser. We do not collect a dime from your appraisal. However, occasionally we get borrowers who want to find their "own appraiser", for whatever reason. We don't mind; it really does not matter to us what appraiser that is used for your loan- however, you could be throwing your money away if you do this.
Every wholesale lender has a so-called "blacklist" of appraisers. If an appraiser ever blatantly over-values a property and it is caught during the underwriting process, that lender will most likely never accept appraisals from that appraiser company ever again.
The problem is, most lenders do not make their blacklist available to the mortgage broker. This means that, occasionally, when we send a loan to an underwriter, we will get a telephone call a few days later informing us that our appraisal is unacceptable.
So while we do not know who the "bad" appraisers are, we do know who the good ones are. We have used the same appraiser for the past five years. We use this particular company because they are always 100% honest and accurate with their appraisals. In other words, the appraisals are never rejected.
So while we do not mind if you use your own appraiser, we strongly recommend that you use Western Trend Appraisals, because we know them to be excellent and because they are not blacklisted with any lender that we know of. If, for some reason, a Western Trend appraisal was rejected by the underwriter, than we would eat that cost for you. After all, we recommended the appraiser.
What does the appraisal process entail?
A professional, independent appraiser will visit your home (or home-to-be) and inspect its interior and exterior. Photographs will be taken; rooms will be measured. The appraiser does not want to buy your home, so whatever you do, do not postpone the appraisal until you get a chance to "clean up." A clean house does not mean that your home's appraised value will be any higher! Please help us to help you- schedule your appraisal A.S.A.P so that your interest rate lock will be good at closing.
The appraiser will calculate the probable market value of the property considering sales of similar homes in the area, also known as "comps" or comparables. The bottom line is that the appraiser will find an average price "per square foot" of homes in your neighborhood and basically multiply your livable square footage by the average price per square foot. He or she can add value for things like swimming pools, but usually can not increase the home's value for unnecessary extras. (For example, if two homes are identical in size, but one has granite countertops and one has formica-- they will appraise for the same amount.)
The lender wants to be sure that the property is worth at least as much as the loan amount. In the unlikely event the lender would have to foreclose, they want to know that they should be able to recoup the loan amount. However, if your interest rate depends on your borrowing, for example, 90% of the property's value and no more, the appraisal can impact your eligibility to qualify for the loan. Because we don't ever want our borrowers to pay for an appraisal that they do not need, we will always ask our appraiser to "pull comps" before he or she ever goes out to the house. We do not want our borrowers to pay for an appraisal that will not meet their needs...and we can usually avoid that. If we can not, you can be sure that we will make it right.
Can I drop my PMI with an appraisal?
In most cases, yes! Usually, you have to pay private mortgage insurance (PMI) until your home is paid down 20%. However, in today's markey, many homes have increased by 10% - 20% per year! Although PMI drops off automatically once your home is paid down 20% (about seven years), it would be foolish to wait that long. Even at a modest 6% per year increase in value, your home would qualify to drop PMI after only three years.
In other words, everybody who has PMI should have their home appraised after a couple of years to have the PMI dropped. Otherwise, the bank will treat your home as if it never appreciates and will only drop the PMI once the house is "paid down." However, if you present the bank with an appraisal that shows your home has appreciated enough, they will be more than happy to drop the PMI requirement. After all, the bank is not profiting from the PMI-- that insurance is taken out with a seperate company altogether. Read more about PMI right here.
Some appraiser / appraisal resources:
Arizona Board of Appraisers
Maricopa County Appraisers
National Association of Real Estate Appraisers
"Real Estate Appraisal", as defined by Wikipedia
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National Wholesale Mortgage, Inc. is an Equal Housing Lender.
