Reducing Risk of Losing Appraisal Fees on Bank Loan Applications

[Steven Jones]

Hello BP,

I'm looking to do a cashout finance for a duplex and single-family home. Both properties are owned through two separate LLCs. I was recently working with a bank that came very close to approving my loan but at the last moment decided to decline my application. (It's still unclear why the loan was declined, but that's a different post.)

The problem: I had already paid about $1,300.00 total for the appraisals, which was non-refundable.

The question: What are some strategies for reducing the risk of wasting the appraisal fees? I'm in the process of restarting the application process with another bank, but they won't allow me to use the old appraisal since: (1) it's been over 60 days since the last appraisals were done and, (2) the company that did the first appraisals is not approved by the current bank?

Some ideas I'm considering:

1. Apply to about 3 or 4 banks simultaneously and get them to all agree to use the same appraiser. I'm not sure if this is realistic.

2. Get each of the 3 or 4 banks to agree to use an appraisal executed by a company that is not on their list of approved appraisers, as long as it's submitted to them within a specified time frame, for example, 45 days.

3. Negotiate with banks to include the cost of the appraisal in the cost of the loan.

4. Ask the bank to pay for the appraisal (wishful thinking maybe, but it should cost much to ask).

Your help. Does anyone have additional ideas? Or maybe, can anyone expound on any of the ideas listed above, in terms of how to increase the likelihood of success?

I deeply appreciate any input.

[Andrew Postell]

@Steven Jones very sorry to hear that this happened.  Unfortunately, it's a far too common occurrence.  For anyone who is researching this topic you can certainly ask a lender to use your current existing appraisal.  As you mentioned the appraiser needs to already be approved with them to be able to use it.  But this shouldn't be our deciding factor.  If a bank is terrible and they can use our appraisal but another lender is great, but cannot use the appraisal, then the choice should be put on working with the better lender.

Now, how to we reduce our risk with lenders?  The answer is that we need to work with investor friendly lenders.  How do we identify investor friendly lenders?  I wrote an entire post on this topic that you can read HERE.  I know, I know...this is obvious.  But you shouldn't have to apply to 3 or 4 lenders.  That's an enormous amount of time and energy.  Just apply with one. You can certainly interview 3 or 4.  And in that interview a lender should be able to tell you unequivocally if you qualify or not.  "But they all say the same thing"....which is exactly why we have to work with lenders that other real estate investors have already worked with.  We have to lean on other people to give us good references...or we will face the exact thing you are facing now.  And it stinks that it's like this.  Not all lenders are equal.  Some will just outright hate writing a mortgage on an investment property - and you'll never know it.  So read that post and lean on some other investors who have already done the hard work of finding good lenders.  That should help reduce your risk on the next one.