Appraisals in a COVID-19 World

You are practicing social distancing. You mask-up just to go get the mail out of the mailbox. But in order to sell or refinance you must allow some stranger into every room of your house?

Luckily Fannie Mae and Freddie Mac, the government mortgage entities have been collecting home value data for years. Every appraisal for the past few years has been entered into a giant database that is used to determine the appraisal requirements for any given transaction. Now with the added complexities of neither homeowners or appraisers wishing to interact with each other, Fannie and Freddie have come up with new rules during this crisis to help with appraisals.

Many transactions, both purchases and refinances, are receiving appraisal waivers. That means the computer system accepts the value of the home in the transaction and no appraisal is needed at all. Many times, an exterior-only appraisal is all that is required. That means an appraiser is assigned and completes a report, but no interior access is required, nor are interior pictures needed.

If a full appraisal is required when the application is run through the underwriting system, yet the home is located in an area that has shelter in place restrictions (our entire state qualifies), a “desktop” appraisal or exterior appraisal may be substituted. A desktop appraisal is where the appraiser does everything from data they compile at their office. No visit to the property is required.

The only time a traditional appraisal is required is if your current loan is not owned by either Fannie or Freddie or if the purpose of your refinance is a cash-out refinance. In some cases, cash-out refinance transactions are receiving appraisal waivers. It all depends on how strong of a borrower you are (high credit scores, lots of disposable income, money in the bank, and lots of equity in your home).

If you have a VA, FHA, or USDA loan, they will follow the same rules as above, except in the case of you pulling out equity. In almost all cases a full interior-exterior appraisal is required.

If you have a jumbo loan, that loan was never sold to Fannie or Freddie. If you are going back to the same lender, it will be their call as to the level of appraisal required. I have so far found the local banks widely different in their approach to appraisal requirements during our shelter in place period.

Let’s be honest with ourselves. Are you really that concerned about an appraiser wearing a mask and not touching anything while snapping a few photos? Most people don’t want the appraiser coming into their homes because of unpermitted improvements. For those of you in that boat, now is the time for you to take advantage of the situation. If you’ve held off on a refinance because of what the appraiser may find inside, you may just be lucky enough to get an appraisal waiver.