Real Estate and Home Mortgages - Refinancing - Is appraisal necessary??
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sweetboy
08-03-07, 11:02 AM
Hi,
I am in the process of refinancing and the lender wants to charge $375 for an appraisal. Is this really necessary? Are their lenders out there who will not require an appraisal??
Thanks,
sweetboy
I am in the process of refinancing and the lender wants to charge $375 for an appraisal. Is this really necessary? Are their lenders out there who will not require an appraisal??
Thanks,
sweetboy
Family Guy
08-03-07, 11:59 AM
If you are refinancing an FHA loan, no cash out, and paying all expenses out of pocket, you could do an FHA streamlined refinance. There are certain guidelines and requirements associated with that loan that I won't go into here. They aren't done that often. If your current loan is not an FHA, that is not even an option.
Otherwise, yes, you must have an appraisal. A lender would be foolish not to validate the condition and value of the house they are investing thousands of dollars into. Appraisals themselves have had to go through changes in the last few years to make them more secure, due to fraud.
If you were going to lend a stranger $10,000 using a $10,000 diamond ring as security, wouldn't you want some assurance that it was in fact a diamond, and that it was worth that much in case you had to repossess it? Would you just take someone's word for it? That's the position these lenders are in.
If your house was appraised a year ago, that appraisal is no longer good since the condition of the house could have changed drastically. An appraisal could be re-certified within a few months, but often we don't even want those. Plus, the lender is actually the client, not the borrower. So an old appraisal is useless to a different lender. Some appraisers will reassign an appraisal to another lender, but they are not supposed to do that anymore.
Otherwise, yes, you must have an appraisal. A lender would be foolish not to validate the condition and value of the house they are investing thousands of dollars into. Appraisals themselves have had to go through changes in the last few years to make them more secure, due to fraud.
If you were going to lend a stranger $10,000 using a $10,000 diamond ring as security, wouldn't you want some assurance that it was in fact a diamond, and that it was worth that much in case you had to repossess it? Would you just take someone's word for it? That's the position these lenders are in.
If your house was appraised a year ago, that appraisal is no longer good since the condition of the house could have changed drastically. An appraisal could be re-certified within a few months, but often we don't even want those. Plus, the lender is actually the client, not the borrower. So an old appraisal is useless to a different lender. Some appraisers will reassign an appraisal to another lender, but they are not supposed to do that anymore.
sweetboy
08-03-07, 12:09 PM
Thanks for the clarity! Makes sense.
michaelshortt
08-03-07, 07:41 PM
You can always ask the lender to pay for the appraisal
marksr
08-04-07, 06:46 AM
Some lenders [mostly banks?] have an inhouse appraiser which is often a fraction of the cost of a regular appraisal :cool:
Family Guy
08-06-07, 10:05 AM
"You can always ask the lender to pay for the appraisal"
True. However, know that the buyer is still paying for it, but in a different way: in terms of interest rate. That may be just fine for the borrower, but know that it's not "free". If this is a typical appraisal, it may cost around $400. That means the bank or lender will need to make an extra $400 or so from the rate (maybe .125% higher, depending on the loan amount) when they sell the loan later (I do not mean servicing). Whether they pay in terms of a direct fee, or by accepting a higher rate for the lender to pay it, the borrower still pays. I'm not saying this is a bad thing, you just need to go into the transaction knowing that nothing is actually free so that you can weigh your options appropriately.
Not many lenders or banks have an "in house" appraiser, but maybe a preferred appraiser that they use on a regular basis. Maybe that appraiser offers a discount? Some will use automated website services for values on a house, which may offer reduced cost. However, these automated services are often wrong since they do not have access to the full information about condition of the house compared to the comparable sales. Most banks use these for equity lines only, not for a typical mortgage like we're talking about here. As that technology improves, however, we are hearing more about it.
True. However, know that the buyer is still paying for it, but in a different way: in terms of interest rate. That may be just fine for the borrower, but know that it's not "free". If this is a typical appraisal, it may cost around $400. That means the bank or lender will need to make an extra $400 or so from the rate (maybe .125% higher, depending on the loan amount) when they sell the loan later (I do not mean servicing). Whether they pay in terms of a direct fee, or by accepting a higher rate for the lender to pay it, the borrower still pays. I'm not saying this is a bad thing, you just need to go into the transaction knowing that nothing is actually free so that you can weigh your options appropriately.
Not many lenders or banks have an "in house" appraiser, but maybe a preferred appraiser that they use on a regular basis. Maybe that appraiser offers a discount? Some will use automated website services for values on a house, which may offer reduced cost. However, these automated services are often wrong since they do not have access to the full information about condition of the house compared to the comparable sales. Most banks use these for equity lines only, not for a typical mortgage like we're talking about here. As that technology improves, however, we are hearing more about it.