Why did I receive different valuations during the mortgage loan application process?

A valuation is an estimate of the amount of money a home may be worth, based on tax assessments and sales information for the housing market in your area.

The valuation will also be based on information about the home including square footage, the number of bedrooms, and bathrooms, and the year it was built.

When you buy or refinance a home, your lender will get at least one valuation. No matter where the values came from, your lender is required to give you copies of each valuation that they have. Those valuations could include:

Tip

You may also get your own independent appraisal, but you might have to pay an additional fee. If the appraisal is well below the price you offered to pay, you may want to consider renegotiating the home purchase price or reviewing the appraiser’s work carefully to understand how the appraiser arrived at the estimated value.

• An appraisal by a licensed real estate appraiser who does a full inspection of the property. This is the most common type of valuation. Appraisal values are generally determined by making adjustments between the features of your home and comparable local property sales (which are called “comps” for short).
• A Broker Price Opinion (BPO), which is an estimate of value provided by a real estate sales professional. A BPO is most commonly used to justify a home’s listing price.
• An Automated Valuation Model (AVM), which is a computer-generated value that uses mathematical models that compare information about the house you want to buy—number of bedrooms, bathrooms, square feet, etc. —with recent sales figures and other information about the housing market in your area.

Your lender may get an AVM when you first submit your loan application, just to make sure that the property value is reasonable. Later, the lender may require a full appraisal by a licensed real estate appraiser. Each of these valuations may be different because they are estimates and may be based on different comps or may have been completed at different times or for different purposes. If there is a big difference between the different valuations, your lender will have to decide which value is most reliable.

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