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Disclosing Appraisal Costs on an LE

Answered by: 
Randy Carey

Question: 
If we disclose a cost for an Automated Valuation Model/Investment Valuation Model (AVM/IVM) or basic evaluation on the Loan Estimate but the valuation amount comes in low and does not support loan request, if the borrower then requests a full appraisal in hopes of a higher estimated value, are we able to send a new LE with the additional appraisal cost since the borrower requested the full appraisal or does the financial institution need to "eat" the additional appraisal fee because we had already disclosed a lower fee amount?
Answer: 

My thought are that if your Automated Valuation Model/Investment Valuation Model (AVM/IVM) or basic evaluation was originally accepted after review and you do get an actual appraisal that comes back with a material difference in valuation, that then just tells the bank that the Automated Valuation Model/Investment Valuation Model (AVM/IVM) or basic evaluation process is flawed and unreliable.

Are you not doing independent second checks on your values as part of your normal due diligence process already?

You cannot allow the borrower to influence your appraisal/evaluation process.

First published on 10/09/2022

Filed under: 
Compliance
Filed under compliance as: 
Appraisal
Reg. Z

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