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Why Do Lenders Request Appraisals?

Why Do Lenders Require Appraisals?

And Once Ordered, Who "Owns" that Appraisal?

Why Do Lenders Request Appraisals?
When asking for an appraisal, lenders are seeking an unbiased expert opinion on the value of the home you’re interested in purchasing – or the property you already own, depending on whether you’re making a purchase or refinancing an existing mortgage – by a third-party appraiser.
Lenders want to feel confident that the home you’re looking to purchase in Red Deer is worth the money you require for mortgage financing or that it’s wise for them to enable you to tap into the equity in your existing property through a refinance.
The essential elements contained within a home appraisal report include information and data relating to: the overall condition of the property; the neighbourhood; variables that contribute to the sale of similar homes in the area; and the time spent in selling comparable properties. 
While appraisals requiring both an exterior and interior inspection of the property are standard practice, an exterior-only inspection – called a drive-by – may be ordered.  
While a drive-by is obviously not as comprehensive, it’s likely to be used when there’s little question about the home’s value supporting the requested mortgage loan amount.
Appraisal costs vary based on several factors, such as the size of the property and the appraisal’s purpose. The typical price range is $300-500, and the prospective homebuyer (or homeowner, in the case of a refinance) typically covers the cost.
Who owns the appraisal report?
A question that comes up time and time again is why mortgage brokers and appraisers can’t provide a copy of the appraisal report to the homebuyer or homeowner. 
This is mainly because the lender is the appraiser’s client, even though the homebuyer/homeowner usually pays for the appraisal. And the appraisal report is prepared based on specific lender requirements. 
Lenders are also often hesitant to provide an appraisal report to a prospective homeowner because they could then shop it around with other lenders – even though that appraisal couldn’t be directly used for any other financing purposes. In addition to receiving permission from the lender, the appraiser would have to agree and prepare a letter of transmittal, an appraisal update or, in some cases, even an entirely new appraisal.
Other common reasons for an appraisal
In addition to an appraisal being ordered to support a new purchase or refinance, if you’re considering selling your home, you may want to commission an appraisal to offer a better idea of your home’s value prior to putting it on the market. 
Appraisals are also carried out in divorce situations, as well as for estate planning and settlement purposes.  
Have questions about appraisals or your mortgage options in Red Deer? Answers are just a phone call or email away!

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