Who Orders the Appraisal?

Question

Note: In the context below, I'm referencing a situation where a private lender is funding the purchase/rehab/reselling of a property with an experienced real estate rehabber/investor.

Before the lender funds the purchase of the subject property, it's in their best interest to get an appraisal.  The appraisal will make them more comfortable with the ARV/LTV ratios they calculated as a part of their deal analysis.

With that said, who normally pays for and orders the appraisal for the subject property; the borrower/real estate flipper, or the lender, as it is with a traditional lender or bank?

Phillip Dwyer · Answer

Similar to regular transaction.  Lender hires an appraiser, buyer pays.

Clint Dorris · Answer

I'm an appraiser.  I actually like working for AMCs because they normally pay on time, but all it is doing is adding a middle man to scrape some money off the top. There are good appraisers working for AMC, but if you can avoid it you should.  An SRA may charge a bit more, but most likely not more than $50-$100, which an AMC would make anyway.

Many lending regulations require the lender to use an AMC, but some banks use them just because they are being over cautious about regulation.  Often, smaller, community banks have more ability to direct the appraisal.

Phillip Dwyer · Answer

They might.  Usually it means they have more experience than many of their colleagues.  People with more experience usually charge more for their services.  You won't like see a huge difference in price unless this is a unique property.

Alvin Grier · Answer

Sorry, one last question.  Do SRA appraisers charge more than those that aren't SRA certified?

I ran a Google search for that question, and couldn't find anything.

Phillip Dwyer · Answer

I don't think an AMC would bring anything to the table for a one-off private lender.  The lender is better off interviewing and selecting the best local appraiser rather than hiring some national AMC that uses cut rate appraisers.  AMCs will charge an additional fee just to move the paper.  At that point you could have hired a second appraiser to either to a review of the first appraisal or complete a second appraisal for comparison.

Alvin Grier · Answer

Oh, OK.  Even though the loan won't be sold, I was under the impression that it still might be in their best interest to go through an AMC, as I've heard that there are benefits to doing so.

I never knew that AMC's were only used for situations where the loan was going to be sold.  Thanks for that insight.

Alvin Grier · Answer

That's what I figured.  Thanks.

Do you recommend the lender go through an AMC?

...assuming, of course, that the lender doesn't already have a relationship with an appraiser that they trust?

Phillip Dwyer · Answer

If the loan won't be sold to Freddie/Fannie, I don't believe the AMC component is part of the equation.  If this private lender is not local, have them look at www.appraisalinstitute.org to find a local designated member (SRA).

Alvin Grier · Answer

Thanks for replying.  It won't be FHA, it's a private mortgage.

Chris Williams · Answer

Buyer pays for the appraisal. If it is FHA and they are requiring two appraisals, the seller will need to pay for the second appraisal.

The buyer's lender will order both the appraisals.

Who Orders the Appraisal?

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