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Ever since Coronavirus lockdown measures were imposed across the nation, lenders and borrowers have had to adjust to a new environment where social distancing forces innovation in common practices such as the home loan appraisal process.

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How COVID-19 Changed the Appraisal System for Home Loans

July 3, 2020

How COVID-19 Changed the Appraisal System for Home Loans
The COVID-19 pandemic has dramatically affected many American industries and the housing market is no exception. Ever since coronavirus lockdown measures were imposed across the nation, lenders and borrowers have had to adjust to a new environment where social distancing forces innovation in common practices such as the home loan appraisal process.

There are severely relaxed requirements for appraisals during COVID-19. Some appraisals may be accomplished as “drive-by” work with the appraiser never setting foot in the home; some may be done via video tours or walkthroughs.

And some others may be accomplished via “desktop research” online with no actual in-person look at the property.

This is one good indicator of the necessity for the optional, but crucial home inspection.

Can a House “Pass” an Appraisal?

The appraisal process is never as complete as a home inspection, but many choose to disregard this idea and assume the appraisal is a stamp of approval on the property and that a house that “passes” the appraisal process is defect-free.

But as we see with the modification of appraisal procedures during COVID-19, appraisals have never been something a borrower should rely upon.

It’s always best to schedule and pay for the home inspection and make buying the home conditional on the outcome of the inspection. If you aren’t sure how to do that, ask a local realtor to explain that process to you.

Appraisals Do Not Protect the Borrower

Appraisals are a tool for the lender, not the borrower. If you buy a home on the strength of the appraisal alone, you are purchasing a home that may not have had more than a glance at the exterior of the property in person. You are NOT buying a house that has been reviewed from top to bottom in search of defects or problems.

Furthermore, the FHA and HUD official sites expressly warn borrowers that no recourse is available from the FHA if you buy a home you did not have inspected and that home later turns up defects you could not spot without the training and experience of a home inspector.

For your protection, get a home inspection. Your home inspector will, depending on your agreement of the labor to be performed, examine the roof, the crawl space, the mechanical systems of the home, and other areas.

The appraiser is not required to physically enter the crawl space or step onto the roof. Ask your home inspector if those things are included in the work you agree to--these are important areas to review before buying property.

Skipping the inspection may seem like a cost-cutting move (inspections can cost $200 or more depending on the size of the home, $400 may be typical), but you save thousands later by spending that inspection money now and avoiding nasty surprises later.

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