Refi/HELOC appraisal v purchase appraisal

2 Replies

Is there a difference between the way an appraiser appraises a home for cash out refi or HELOC and the way he appraises a home for purchase?

My experience: I'm on my 3rd property purchase and have done one cash out refinance and one HELOC. I've noticed that the appraisals for my home purchases have been super thorough and have come in lower than expected. Conversely, I've noticed that the appraisals for my refi and HELOC haven't been as thorough and have come in higher than expected. In fact, for the refi appraisal the appraiser only took a few steps inside the home and for the HELOC the appraiser didn't even see the home.

Is there a difference or is it just me?

Hi @Alipate Moleni !  It's not just you, it's a totally different appraisal.  Well, err, it's not totally different but it is about 1/2 the cost and faster and has one giant difference.

When you are doing a fresh purchase of a home the appraiser has two data sets:  1. what the market has done and 2. what the contract they are holding in their hand indicates the market is willing to do, subject to the appraisal meeting the contract value.  In my market these appraisals (sometimes called full-blown appraisal) cost about $775

When you are doing a refinance the appraiser has access to the first data set, but there is no second data set (i.e. the contract) to pull from.  In my market these are called "drive-by appraisals" and cost about $275

So, with a refinance they have the luxury of knowing what it appraised for last time it sold and then they can observe (if they want) the updates made since then, the time of ownership, and the valuation of that area since the original purchase price.  The fresh purchase appraisal is, in theory, the riskier step in the process since the lenders are trying to determine if this asset they do not currently have as collateral is a sound endeavor.  On a refinance, they're already in bed with it, so they're more-so trying to determine if the equity is there. 

@Will Fraser oh ok, that makes sense. One more question: You said refi appraisers have the luxury of looking at the purchase appraisal... How much does the purchase appraisal influence a refi appraisal?

The reason I ask is because I'm about to purchase a property that just appraised way lower than I had hoped and was planning on doing a refi on that property in the near future. Frankly I would rather the refi appraiser not even look at the purchase appraisal. Thanks!