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Lenders Don't Always Need a Full Appraisal.

A residential appraisal can have different degrees of collateral evaluation. They are:

Full exterior and interior with photos Exterior-only inspection Automated valuation model

The full exterior and interior with photos, often called the "full" appraisal, is the type of appraisal that is most commonly ordered. The appraiser will physically inspect the inside and outside of the property and take pictures of both. These appraisals will typically cost about $450 or so.

The exterior-only inspection is sometimes called a "drive-by" because the appraiser does his homework with regard to the comparable sales in the area, then stops by the property, takes some exterior photos, and moves on. A drive-by can lower the cost of an appraisal by $100 or more.

Finally, there is an option that is performed with an automated valuation model (AVM). An AVM automatically searches public records for previous sales in the subject property's neighborhood and compares those sales numbers with the sales price that appears on the sales contract of the subject property. This might cost $100.

But who decides which type of appraisal to use? It's part of the AUS decision. When the loan is approved by an AUS, the decision may also say something to the effect of "system cannot locate property; a full residential exterior and interior inspection with photos will be required," and that's what the lender will use. Or it could say, The AUS accepts the value submitted. An exterior-only with photos is sufficient."

When a buyer applies for a loan, the loan officer usually asks for a check to cover the cost of the appraisal and will ask for whatever a full exterior/interior appraisal will cost, say $450. "Thank you for your application; now we need to order your appraisal and credit report. You'll need to pay for those up front, and that will be $450 for an appraisal and $20 for the credit report."

Instead of handing over a check, ask what the AUS is requiring. Odds are that the loan officer hasn't even looked at that section of the AUS approval. A loan officer is commonly interested only in whether the loan is approved and pays little attention to the approval details. If your credit is strong and you've got a down payment or equity position of 20 percent or better, it's likely that a full-blown appraisal isn't needed. And as we talked about in Chapter 2, you'd use the lingo: "Does the AUS decision ask for a full appraisal?"

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