For many homebuyers, the appraisal is one of the biggest milestones in the mortgage process. While most borrowers know an appraiser visits the property, few understand everything that happens before and after the inspection.
Here’s a step-by-step look at the life of a residential appraisal in the Temecula Valley.
Step 1: The Appraisal Is Ordered
Federal regulations prohibit lenders from ordering an appraisal before the borrower has indicated an intent to proceed with the loan application. Once that occurs, the lender orders the appraisal.
Today, nearly all appraisals are ordered through an Appraisal Management Company (AMC) rather than directly with the appraiser. The AMC randomly assigns a qualified, state-licensed appraiser while maintaining appraisal independence between the lender and appraiser.
Step 2: Property Inspection
After accepting the assignment, the appraiser contacts the listing agent, homeowner, or occupant to schedule the inspection.
During the visit, the appraiser evaluates:
- Overall condition
- Quality of construction
- Room count and layout
- Gross Living Area (GLA)
- Site improvements
- Upgrades and renovations
- Deferred maintenance
- Exterior features
- Neighborhood influences
The inspection is only one part of the assignment. Most of the appraiser’s work occurs afterward while researching comparable sales and preparing the report.
Step 3: The Appraisal Report Is Completed
Following the inspection, the appraiser researches recent market activity and prepares the appraisal using the Sales Comparison Approach, along with other approaches when applicable.
The completed report includes:
- Market analysis
- Comparable sales
- Adjustment grid
- Property photographs
- Location maps
- Floor plan or sketch
- Final opinion of market value
The report is then delivered electronically to the AMC.
Step 4: Underwriting Review and SSR Scoring
For most Conventional loans, the appraisal is submitted electronically through the Uniform Collateral Data Portal (UCDP), where it receives a Submission Summary Report (SSR) and automated collateral review.
The SSR compares the appraisal against millions of market data points and evaluates items such as:
- Comparable selection
- Market trends
- Prior sales
- Adjustments
- Statistical valuation models
The SSR is one tool underwriters use during their appraisal review. It does not determine value but may generate questions requiring clarification from the appraiser. Fannie Mae and Freddie Mac assign this score from 1-5, five being the worst. 1-2.5 is typically ok. 2.5-5.0 can lead to additional questions, need for more comparable sales, questions answered, and in the worst-case a whole new appraisal. IMO, the appraisal is not completely good-to-go till this process is addressed and signed-off.
Step 5: Reconsideration of Value (ROV)
If new market evidence exists, the lender may submit a Reconsideration of Value (ROV) request.
An ROV is not an opportunity to negotiate value. Instead, it allows the appraiser to review factual information such as:
- Comparable sales that may have been overlooked
- Data corrections
- Significant factual errors
The appraiser independently determines whether any revisions are warranted.
The newer ROV Form must be signed by the consumer and if they elect to rebut the appraisal, it has to be 100% the initiation of the borrower — not the lender, loan officer, buyer realtor, or listing agent. Prior to this ruling, lenders and realtors acted together to rebut and then engaged the borrower. Now any rebuttal needs to be initiated by the borrower.
Step 6: Copy Provided to the Borrower
Federal law requires borrowers to receive a copy of the completed appraisal promptly after it is finalized and no later than three business days before closing, unless the borrower waives the timing requirement as permitted by law.
Step 7: Appraisal Sign-Off
Once underwriting is satisfied that the appraisal complies with investor guidelines and any requested revisions have been completed, the appraisal is approved and the loan continues toward final approval.
VA Tidewater Process
VA loans include a unique protection called the Tidewater Initiative.
If the VA appraiser believes the property may not support the contract price, the appraiser notifies the lender before completing the report. The lender and real estate agents are typically given an opportunity to provide additional comparable sales or market information for the appraiser’s consideration before the value is finalized. This typically gives the client, lender, and realtors 24-48 hours to provide additional data.
While Tidewater does not guarantee a higher value, it provides an opportunity to submit additional market data before the appraisal is completed. Really it gives the listing agent and seller time to substantiate the pricing.
When Is a Second Appraisal Needed?
A second appraisal is relatively uncommon but may be required in situations such as:
- The original appraisal contains significant deficiencies.
- Underwriting cannot resolve material concerns.
- Investor or agency guidelines require a second appraisal for certain higher-risk transactions.
- Larger Jumbo Loan Limit Financing
- The original appraisal has expired and cannot be updated under program guidelines.
- Evidence of fraud, bias, or substantial errors is identified.
In most transactions, one well-supported appraisal is all that’s needed.
Final Thoughts
A residential appraisal is much more than a property inspection. From the initial order through underwriting review, SSR scoring, potential reconsiderations, and final approval, multiple quality-control steps help ensure the value opinion is independent, well-supported, and compliant with lending guidelines.
Understanding the appraisal process helps borrowers know what to expect and why this important step plays such a critical role in every successful mortgage transaction. And one additional note, please always keep a copy of your appraisal handy post-closing.
