We often pay for purchase appraisals upfront on behalf of clients for a few reasons.
Rush Fees: We pay a large rush fee that we don’t charge our clients and because we can’t separate the rush fee from the standard fee, we just pay the entire fee upfront (we don’t want our clients paying the rush fee at all); and
The Need for Speed: We want to get our purchase appraisals back as quickly as possible, and ordering and paying for the appraisal immediately ensures that we get stellar service.
In contrast, almost all other lenders prepare disclosures and wait for them to come back signed before charging the borrower and then ordering the appraisal (because borrowers cannot be charged for anything before disclosures are signed).
This saves lenders money but it can easily delay an appraisal by as much as a week.
As a result of our policy, we end up “eating” the cost of five to ten appraisals every month, but it is worth it because we get far better service and much happier clients (and then more repeat business).
While almost all of the appraisals we “eat” are a result of deals just dying for a variety of reasons, on rare occasions we have to eat an appraisal when a borrower decides to move to another lender (God forbid 😊).
So, you can imagine our surprise when those borrowers simply demand that we hand over the appraisal that we paid for.
Obligations For Sharing Appraisals
In light of that, I wanted to set out what our obligations are.
Lenders must share a copy of every appraisal with borrowers. Lenders are in fact obligated to share a copy of all appraisals obtained in connection with an application for credit that will be secured by a first mortgage. BUT – that copy can just be a black and white copy or a digital copy that still has the lender’s name on it (important for the below point).
Lenders can charge borrowers for the appraisal and for a copy. If borrowers have not paid for the appraisal yet, lenders still have to provide “a copy” of the appraisal, as stated above. But, if the borrowers want the full appraisal in a form that another lender might be able to use for lending purposes, lenders can sometimes charge the borrowers the full appraisal fee. I say “sometimes” because this is somewhat of a gray area for lenders like us who order appraisals immediately.
Lenders have no obligation to share or “release” an appraisal with other lenders. New lenders often need a formal “release” of an appraisal from the previous lender, whose name is on the appraisal, before the new lender can use the appraisal for lending purposes. The old lender has no obligation to provide the release to the new lender, but the old lender does have an obligation to provide the release to the borrower. As a matter of practice, we usually provide releases to anyone who requests one as long as we have been reimbursed for the appraisal.
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