The real estate appraiser plays a key role whether you are buying a home, selling one or refinancing a mortgage loan. If the appraiser doesn't give the home you want to buy or sell a high enough appraisal, you might be unable to close a real estate sale or purchase. A low appraisal can also scuttle a refinance.
But don't think you can coax a high appraisal of a home by hiring your own appraiser. You can hire your own appraiser, but mortgage lenders will also order their own appraisals of the property you own or want to buy. And it's this lender-ordered appraisal that matters in real estate transactions.
If you're applying for a mortgage loan, you cannot hire your own appraiser -- the lender chooses the appraiser. You can only hire your own appraiser if you want your own assurance of the property's value or if you don't need financing (you're buying your home with cash), although the seller may have to approve your choice.
If You're the Buyer
When you apply for a mortgage loan to purchase a home, your lender will order an appraisal of the property you want to buy. Your lender wants to make sure that it is not lending you more money than what the home is worth. If the appraiser values the home at a price that is too far below the purchase price upon which you and the seller have agreed, the mortgage lender might refuse to provide you with a mortgage loan, potentially derailing your purchase.
You can't hire your appraiser to do this. In deciding whether to loan you money, your lender will only consider the appraisal it receives from the appraiser it hires. You will, though, have to pay for this appraisal whether your real estate purchase goes through or falls apart.
If You're the Seller
When selling a home you might order an appraisal on your own to help set the right asking price for your home. Know, though, that when a buyer makes an offer on your home, that buyer's lender will not accept the appraisal that you paid for. Instead, the lender will order its own appraisal.
If You're Refinancing
Refinancing your existing mortgage loan into one with lower interest rates can save you hundreds of dollars a month, depending upon how far your interest rate drops. But most lenders require that you have at least 20 percent equity in your home before they'll refinance.
To determine if you have enough equity, your lender will again order its own appraisal of your home. Though you'll have to pay for this appraisal, you will not be able to select and hire your own appraiser. Again, this job falls to your mortgage lender.
Relationship Between Lenders and Appraisers
Your lender orders its appraisals directly from appraisal companies themselves or through appraisal management companies. These companies choose the appraiser who values a home; lenders are not allowed to choose the particular appraisers that they want. The appraisal process works this way so that lenders can't hire appraisers with whom they have personal relationships and who might be willing to appraise homes at higher values so that these lenders can close more refinances and sales.
- Realtor.com: Home Appraisals: 4 Questions Before You Buy
- Master Appraisal Services: When You Can Hire Your Home Appraiser - And When You Can't
- Rocket Mortgage. “Refinance Appraisal vs. Purchase Appraisal.” Accessed June 8, 2020.
- Rocket Mortgage. “Home Appraisal: What Is It, And What Does It Cost?” Accessed June 8, 2020.
- Appraisal Institute. "Frequently Asked Questions," Page 1. Accessed June 8, 2020.
- Fannie Mae. "Uniform Residential Appraisal Report (Form 1004)." Page 4. Accessed June 8, 2020.
- HUD.gov. “Streamline Your FHA Mortgage.” Accessed June 8, 2020.
Don Rafner has been writing professionally since 1992, with work published in "The Washington Post," "Chicago Tribune," "Phoenix Magazine" and several trade magazines. He is also the managing editor of "Midwest Real Estate News." He specializes in writing about mortgage lending, personal finance, business and real-estate topics. He holds a Bachelor of Arts in journalism from the University of Illinois.