Learn about the valuation and appraisal process for loans funded through RCN Capital’s Correspondent Program for brokers and private lenders. Private Lender Link’s CEO, Rocky Butani visited RCN Capital’s office in Connecticut in January 2023 to interview the company’s CEO, Jeffrey Tesch. Watch the video or read the transcript below.
ROCKY BUTANI:
If a correspondent partner is working on a deal that is really time sensitive, do you have to do an appraisal? Is it always required and is there anyway you can waive it for any deal?
JEFF TESCH:
So the appraisal, or let’s call it the valuation, is always required for every loan. Now a full appraisal is going to be required for all of our long-term rental loans. The reason why is because it’s so important to be able to access the inexpensive capital that we access to get a full valuation, so that there’s certainty that over the long term, these properties are going to rent out for what they say they’re going to rent out for. However, on the bridge side, there are other products when you meet certain criteria of experience as well as loan value, where you can do what’s known as a broker price opinion, which gives you the ability to skip the appraisal process and go in a shorter format. There are a few caveats that you need to be able to benchmark to get there, but you should always ask your rep, “Can I use an alternate valuation method?”
ROCKY BUTANI:
Is it possible to do an appraisal after closing, or does a BPO take care of it?
JEFF TESCH:
Yeah, BPO takes care of that. So we’re always going to need some sort of valuation upfront. And then from there we close and away you go.
ROCKY BUTANI:
At this time, what’s the typical timeframe for a full appraisal versus a BPO?
JEFF TESCH:
That’s a good question because really a year ago (in early 2022) it would be a much different answer. As everyone knows, interest rates were super low, and the conventional refinances for owner-occupied properties were flooding the marketplace. So us as commercial lenders, we all use the same pool of appraisers and unfortunately they were backed up. Well today, mortgage origination on the conventional side is at all time lows, at least in the last 20 years. So we’re turning these appraisals around in two to four days, whereas a year ago it was one to two weeks minimum.
ROCKY BUTANI:
So a full appraisal doesn’t necessarily slow down the deal closing, at least at this time.
JEFF TESCH:
Not anymore. It’s a whole different world today.
ROCKY BUTANI:
And what are the typical costs for an appraisal? How much does the borrower have to pay?
JEFF TESCH:
Well, anywhere from $400 to $600 on most loans. Sometimes you get into some of the more urban markets, the price will be a little higher. But today it’s anywhere between four and six hundred bucks for an appraisal.