There are four home appraisal types for the mortgage loan process. The four types are the full appraisal, exterior-only appraisal, the rental analysis, and the broker price opinion. A full appraisal is the most common type of appraisal.
How the appraised value is determined is the same for all home appraisal types. The appraisal costs for each is different.
Home Appraisal Types
Mortgage loan programs will dictate the home appraisal types that are required. The vast majority of the time it will be the full appraisal. The lender will then ensure the correct type is ordered with the Appraisal Management Company (AMC).
Appraisal Related Articles
- Home appraisal process (great overview of the process)
- Don’t pay for the appraisal too soon
- How appraised value is determined (hint: it’s not price per square foot)
- Avoid appraisal pitfalls
- Appraised value vs. sales price – how to prepare for the worst
- How to fight a low appraisal
Full Appraisals
A full appraisal entails the Appraiser inspecting the interior and exterior of the property. Therefore, it includes taking pictures, providing commentary, and comparing the home the other comparable homes in the area. This is what the vast majority of mortgage loans use to determine a home’s value. The mortgage industry often refers to the full appraisal as a “1004” (pronounced “ten oh four”) because that’s the report’s form.
Exterior-Only Appraisal
Exterior-only appraisals are often referred to “drive-by” appraisals since the Appraiser is literally driving by the property. The Appraiser takes exterior pictures but does not enter the home. The industry refers to these appraisals as “2055” because of the form used for these appraisals. The cost is typically less than that of a full appraisal since less work is being done.
Exterior-only reports are rarely used when getting a first-lien mortgage to buy or refinance a home. These exterior-only reports are typically used for appraisal reviews (more information below) or for stand-only second lien mortgages done by small banks.
Rental Analysis
A rental analysis, or a “1007” (pronounced “ten oh seven”), is for loans on investment properties. This is an addendum to a full appraisal. While the full appraisal compares the property’s value to comps sold, a rental analysis compares the subject property’s potential rental income to that of leased rental homes in the area.
A rental analysis is typically an extra $150 to $200 because it requires more effort from the Appraiser.
Broker Price Opinion (BPO)
A broker price opinion (BPO) is what we call an “appraisal lite” and isn’t done by an Appraiser. BPO aren’t common and are not typically used when buying or refinancing a home. A BPO is most often used for mortgage insurance cancellation on an existing home loan or when getting a stand-alone second lien mortgage. The cost for a BPO ranges from $150 to $300.
What’s Next
Mark and the team can walk you through the entire home loan process and mortgage loan process. Call us with any questions and let us know how we can help.
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