How are appraisers selected?

Question

How do lenders choose the appraisers?  I was told that lenders cannot simply pick whoever they want to now. This was different pre 2008.  Could some mortgage lenders out there weigh in on this process?

Brad Stuteville · Answer

@Bill Gulley is spot on.  On residential typically its a rotation or random selection.

For commercial ; I'm speaking from the community bank perspective here... there are certain guidelines and each bank has a slightly different policy.  Some larger banks have 3rd parties that blindly bid them out.  Others have a separate department do this.  What is important is having someone completely arms-length from the lending decision be the one to engage the appraiser.

Other factors include the size and complexity of the appraisal which may effect the size of the available appraisal pool.

Remember that if there is a serious deficiency in the appraisal that results in an incorrect value (up or down) talk to your lender.  They want to have a correct value as much as you do, and there is a process for correcting these issues and getting a good value.

Alice K. · Answer

I had this same question not too long ago. According to my lender--

Large banks:

* Tend to have large pools of experienced, approved appraisers, some may not be local and may give inaccurate appraisals, so you'll want to confirm with the bank that they only use local folks so you don't need to get a re-appraisal.Many local banks:* Have a set of 5 - 15 (varies) experienced, approved appraisers, like the others said, a rotation. My local bank sends out an RFP (request for proposal) of sorts and the first to reply gets the job.The lender will scrutinize and review everything very hard. In fact, no matter what it is, large bank, small bank, whoever, the appraisal will be reviewed usually by another professional for accuracy.

If you need a reappraisal, you can try to ask the bank to cover (or ask for them to pitch in). I've not done this for a full appraisal amount, but heck, everything is negotiable. Esp, if you're paying horrendous fees already.

If you're worried about something going wrong, you can recommend that the seller is there with papers / receipts (roof, comparable sales, etc) to support the price.

JD Martin · Answer

In my opinion? With a ouija board, a 2-head coin, or a pin-the-tail on the appraiser party. I don't live in a terribly big area and I have never had the same appraiser twice, even using different lending institutions.

As Bill said, you have no say in the matter. I have had appraisers that I thought did a very good, thorough job (whether I liked the appraisal or not), and others that make me wonder if they got their license in a Cracker Jacks box. I have never asked to use a certain appraiser, but I have asked the bank to not use an appraiser because I thought they demonstrated poor knowledge of an area. Whether it has made a difference, I can't say, but I suspect not.

Bill Gulley · Answer

Local appraisers who  are qualified are placed on a list and assignments are rotated through that list.

Mortgage bankers or wholesalers who purchase loans from banks will usually have a list of qualified appraisers and the originators follow that list to sell to them.

There is an "audit trail" for the method as well that the lender must be able to show, it can be by the date and time of the application with the order for services, so there is no selecting your buddy.

This doesn't apply to commercial loans, but it also depends on how many qualified appraisers there are in a lending area, if you have 15 MAI qualified appraisers then rotation would be a good practice, if thee is only 1, there isn't much choice. :)

Mike Pena · Answer

Ha. I see what you are saying. I am all about playing by the rules. I would prefer not to be in that gray area unless there is a really good reason supported by strong facts.

Stephanie Medellin · Answer

The wholesale lenders that I use all order appraisals through an appraisal management company.  It's basically the same idea as above, but it's a third party selecting the appraiser from their own list.

Mike Pena · Answer

@Jd Martin  I just don't want the same bad appraiser again and didn't know if that was even an option.

Mike Pena · Answer

It wasn't in Lee's Summit. I wish it was, would have been more competition.

Mike Pena · Answer

Maybe I miss spoke. I am wanting to know the process and how it works. Not to commit loan fraud.

I completely understand the conflict of interest.  I don't want an appraiser to just give me the number I want.  They are humans too and can make mistakes.

Long story but I have had to order a second appraisal before ( both I had no relationship with). The 2nd came in $10k higher. I did a lot of market research and supported my reasoning for requesting a second appraisal.  Neither came in at selling price but one was way off.  I paid for both appraisals got the deal done and saved some money. However, this house was in smaller city just outside of KC.  Not very many appraisers in town.

Bill Gulley · Answer

Yes and dropping hints puts your lender in a professional  pinch, I suggest you not say a thing and if you're guy is in Lee Summit, he could well end up with it anyway. Leave sleeping dogs lye. :)

How are appraisers selected?

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