• Appraisal Facts With a Reverse Mortgage

  • by Kristen Curzytek

One of the critical steps in the process for receiving a Reverse Mortgage is having an appraisal performed on your home. This quick step is necessary to determine the value of your home. Whether you’ve have had an appraisal in the past or this is your first one, here are some common concerns and answers for what is involve in an appraisal.

What is an appraisal?

An appraisal is an opinion of value that is completed by a professional appraiser. The appraiser will come out and perform an inspection; looking at a few different features of your home. The appraisal is a three step process. Here is what you can expect:

  1. The appraiser comes to your home and performs an inspection.
  2. The appraiser will research similar homes in the area and compare recent sales to determine a fair market value.
  3. The appraiser will give a final report will all of the data and research and give an “opinion of value.”

How does an appraisal work? Appraisals can vary by state but you can expect these three things to be the same nationwide:

  1. The inspection – a licensed appraiser comes to the property and inspects your home to determine fair market value.
  2. Comparables – the appraiser will research homes in your area and will compare recent sales in your area to determine market value.
  3. Final Appraisal Report – the appraiser will gather all findings from the inspection and comparable research to issue a final appraisal report for your home.

Why do I need an appraisal to get a Reverse Mortgage?

The appraisal helps to establish your property’s market value. The proceeds from a Reverse Mortgage are determined using your age and the value of your home. The appraisal is essential to the Reverse Mortgage process.

How is an appraiser selected?

The Appraisal Management Company (AMC) will select an appraiser familiar with your area to complete the inspection and report. You cannot select your appraiser and by law your reverse mortgage company cannot select your appraiser. It is crucial

Can clients ever choose their own appraiser? Why or why not?

No. The Appraisal Management Company (AMC) manages appraisals and determines who conducts the appraisals. Due to recent Wall Street and consumer protection reforms, the Federal Housing Administration (FHA) does not allow anyone to choose their own appraiser.

Is the appraiser licensed in my state?

Yes. Your appraiser is licensed in your state. It is important for the appraiser to be knowledgeable to the area you live in.

Are there fees associated with the appraisal?

Yes. Fees are charged by a licensed, certified appraiser for an official opinion of the market value. These fees may vary and are paid to the outside appraisal company. If your loan allows for it, these fees can be rolled into the transaction.

When does an appraisal expire?

Generally, appraisals for Reverse Mortgages are valid for 4 months from the date of the appraisal until the date the loan closes.

If there are foreclosures or short sales in my neighborhood, will they affect the value of my home?

Yes. One of the factors in determining your home’s value is the recent sale of homes in the area. It will not matter if a home is a foreclosure or not, the appraiser will consider all recent sales to help determine the current market value of your home.

What happens if my appraised value comes in lower than what I told my licensed professional?

If the value is lower than what was initially anticipated, you and your licensed professional will work to find a solution. Remember, the value of your home is a crucial factor in the amount of proceeds you receive.

I had an appraisal done a few months ago. How did my value change so much since then?

Values can fluctuate throughout the year due to consumer demand, recent sales, and other factors.

My house is worth half the amount of my next-door neighbor. Why?

Many things are taken into consideration when determining the value of a home. Make sure you are comparing apples to apples. If your neighbor’s home is larger than yours, has more bedrooms or something else that could be the reason the difference in what each home is worth.

I searched online and found a few websites that tell me my value is much higher than what the appraiser said. Why?

Some online estimate websites are not looking at updated data which can give you a false value on your home. A licensed appraisal walking through your home can give a much more accurate value of your home than online estimate websites.

Can I challenge the appraisal amount if I disagree with it?

If you believe the appraiser made an error, we will work diligently to make sure it is corrected and you get a fair and accurate report.

A Reverse Mortgage appraisal is not much different than a traditional mortgage appraisal. If you have any questions about the appraisal process, feel free to contact us. Our licensed professionals will help you through every step of the process. They will be able to give answer any of the questions you may have. Remember the appraisal is a vital part of the Reverse Mortgage process, it is important for you to know the facts so you can have a successful appraisal.