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BE AN INFORMED HOME BUYER

WHAT IS AN APPRAISER?


The appraiser is the independent, impartial, and objective professional in the mortgage transaction. An appraiser develops an appraisal which is a credible, reliable, and supported opinion of value. An appraisal is typically used by the lender in a home purchase transaction; this assists in the lender’s decision to provide funds for a mortgage. While the lender is technically the owner of the appraisal, as a borrower you still have certain rights:


WHAT ARE YOUR RIGHTS?


You have the right to obtain your own appraisal, even if you are paying cash for a property. You have the right to know what type of valuation service is being ordered for your loan. You have a right to make an appraisal a contingency in your sales agreement. A home purchase is typically the largest investment someone will make.


PROTECT YOURSELF!


Protect yourself by getting your investment appraised! The appraiser will observe the property, analyze the data, and report their findings to their client. The client may be the lender, borrower, or other third-party. An appraisal ordered by a lender is for the benefit of the lender to ensure that the collateral they are using to securitize the loan is sufficient. An appraisal is not a home inspection. While all appraisals are valuation services, not all valuation services are appraisals. There are a number of products which appraisers, real estate brokers, or other entities prepare which vary in levels of analysis, detail, and reliability. From most comprehensive to least comprehensive, they are:


APPRAISAL REPORT (SOURCE: APPRAISER)


Definition: An opinion of value that is developed by a licensed appraiser in compliance with the Uniform Standards of Professional Appraisal Practice (USPAP).


It is unbiased, independent, objective, impartial, credible and reliable opinion of value.


Level of Inspection can affect results: Interior and Exterior Inspection by an Appraiser. It is the most comprehensive level of inspection/valuation.


HYBRID OR BIFURCATED APPRAISAL (SOURCE APPRAISER AND/OR NON-APPRAISER)


A third-party performs the property inspection and provides the information to the licensed appraiser who uses this information, as well as other data, to complete the appraisal in compliance with USPAP.


Level of Inspection can affect results: Inspection by an Appraiser or a Third Party


DESKTOP APPRAISAL (APPRAISER AND/OR NON-APPRAISER)


A valuation performed without an interior or exterior inspection of the property by an appraiser or any 3rd party. All research is based on information from tax records, MLS data and other reliable sources.


Level of Inspection can affect results: No inspection.


CMA OR BPO (BROKER OR SALES AGENT)


Comparative Market Analysis, or CMA - Commonly prepared by a real estate agent to help their client determine a reasonable listing or purchase price for a property. CMAs do not comply with USPAP.


Brokers Price Opinion, or BPO - Commonly prepared by a real estate broker to determine price (not value), BPOSs are traditionally associated with short sales, foreclosures and/or relocations. BPOs do not comply with USPAP.


Level of Inspection can affect results: May or may not have inspection by Appraiser


EVALUATION (NON-APPRAISER)


Evaluation - An opinion of value for use by a lender. An evaluation does not have to comply with USPAP and does not have to be completed by a licensed appraiser.


Level of Inspection can affect results: No inspection.


AUTOMATED VALUATION MODEL (AVM) - (COMPUTER GENERATED ALGORITHM)


An AVM is a mathematical model which estimates real estate property value. AVMs were designed to speed up the valuation process and reduce costs. Using algorithms and previously collected information, a value estimate is computer generated. Results may not be credible if adequate and relevant data is unavailable. An AVM is an evaluation, which is not an appraisal. Both Fannie Mae and Freddie Mac offer AVM-based valuations. Lenders may refer to this as an appraisal waiver. Borrowers have the right to reject the waiver and request an appraisal report.


Level of Inspection can affect results: No inspection.


SOURCE: NATIONAL ASSOCIATION OF REALTOS (NAR)





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