Full appraisal, a BPO, or my own comps on a $180k loan?

The eleven day thing is doing a lot of work in this post. Is the appraisal actually the slow part, or is the borrower using it as the reason he can't give you time to think?

I priced this out for myself last month and never funded anything, so take it for what it's worth. An appraisal on a $180k loan is well under a quarter of a percent of the loan amount, and the borrower pays it anyway. Against that, being wrong on value by ten percent is $18k. I couldn't make the numbers say skip it. What I couldn't answer is whether an appraisal actually gets me closer to right or just gets me a document, since appraisers reconcile to the contract price more often than anyone admits.

Require it in your term sheet as a condition of funding, name who orders it, and say the report has to be addressed to you. Otherwise you're negotiating it under time pressure with a borrower who wants to close, which is the worst moment to be deciding what your standards are.

warrant is on the thing that bit me. I got handed an appraisal the borrower had already ordered for his own bank application, and the engagement letter named the bank as the client and the intended user. My name appears nowhere in it. The appraiser owes me no duty on that report, and when I asked him to reissue with me as an intended user he wanted a new fee and a new inspection.

Read the transmittal page and the intended use paragraph before you rely on any report the borrower brings you. Also check the effective date, because I've seen a value opinion recycled from four months earlier presented as current.

Does a BPO cost the borrower anything close to what an appraisal does? And if I get a BPO plus my own comps and the two agree within a few percent, is that meaningfully weaker than one appraisal? I'm trying to understand whether the value comes from the license or from having two independent looks.

Loan size is the wrong dial. Complexity is the dial. On a tract house with six closed comps inside half a mile, my own comps get me within three percent and I'd be comfortable. On anything unusual, a converted duplex or the only four bedroom on a street of two bedrooms, I want somebody licensed writing down the adjustments, and that's true whether the loan is $80k or $400k.

What's a comp adjustment grid? I've seen the phrase twice in this room now and I don't want to keep nodding.

anchor, the license buys you a defined scope and someone who can be asked to explain their reasoning later. It doesn't buy you accuracy.

And one wrinkle for anybody comping off public records: roughly a dozen states don't make sale prices public at all, so depending on where the collateral sits, your county data may show you the transfer and not the number. In those markets, doing your own comps without MLS access isn't a discount option, it's not an option.

Nobody's mentioned the repair side of the value. An as-is opinion on a house that needs a roof and mechanicals is only useful if whoever wrote it actually priced the deferred work, and appraisers mostly won't. I'd want the appraisal for the value and a contractor walk for the condition, because the gap between those two is where a $180k loan turns into a $180k problem.

Rent comps too, if there's any chance the exit becomes a lease. Cheap to pull and it tells you what the floor looks like when the retail buyer doesn't show up.