Reverse Mortgage Appraisals and Appeals

An appraisal is part of the process when closing a reverse mortgage, just like a traditional “forward” mortgage.  An FHA-approved appraiser will review the comparable sales in the area and also perform a physical inspection of the property.  

If you’re anything like me, the appraisal process can be a little nerve racking.  Believe me, the lender/bank also might get a little anxious about the appraisal.  Both sides of the transaction want this process to run smoothly and each party to be happy with the result.  In this blog post, I’m going to share some information about the process itself.

First, the appraiser must be an independent party.  This is probably the most important thing to know.  The lender cannot select the appraiser, influence the appraiser, provide the appraiser with any number or figure, or have an existing relationship with them.  This wasn’t always the case.  Prior to the 2008 housing crisis, lenders could order an appraisal from any appraiser they wished, and if they thought they were doing a poor job, they could simply fire them and order a new one.  Technically, the Department of Housing and Urban Development (HUD) required that appraisals be logged into their system once they were ordered, but this was not always done.  When this step was not completed, this allowed lenders to try different appraisers at times.  Probably the most important outcome from the fallout of the housing market collapse in 2008 related to reverse mortgages were the laws put in place that require independent appraisals. 

Next, if you happen to disagree with the appraisal on your home, there are a few things that can be done.  Any borrower can register a complaint against the appraiser in the state where the appraiser is licensed, and they can also file a grievance with HUD if the appraiser was negligent or made gross errors.  Should a huge issue occur, it is possible to order a new appraisal.  However, this is not a common occurrence.  

Unfortunately, it can be very difficult if you simply disagree with the value the appraiser gave your home.  The very best evidence is comparable home sales in the area.  Facts, facts, and more facts are the best way to support a claim that your home is worth more than the appraiser concluded.  Even going to a different lender will not solve this problem.  The reason for that is because the appraisal gets logged into HUD’s system even before the bank gets a copy of it.  This means that if a borrower chooses to try a different lender, the new lender would be using the exact same appraisal until it expires.  A borrower could certainly decide they don’t want to move forward due to the appraisal and just wait until the market conditions change.  If that happens, and the previous appraisal expires, then the lender would need to order a new appraisal.  

Finally, I also want to share that it is not in the lenders best interest to have appraisals come in lower than the borrower was hoping for.  The main reason is that when this happens, there is risk that the borrower chooses not to move forward and the loan does not close.  By the time the appraisal has been ordered, the bank has invested a good amount of time, and therefore money, into the loan process.  If the borrower is unhappy with the appraisal and the loan does not close, nobody wins.  

There are a lot of different aspects involved in a reverse mortgage.  Hopefully this helped explain one of them :)  If you’d like to learn more about the reverse mortgage process or have a question about any aspect of a reverse mortgage, please don’t hesitate to contact the team at Equity Access Group for help.