Technology has pretty much caught up with everything. Almost all around us seems to be automated in some way, working faster and smoother than before. America's productivity gains are no secret and it's due in large measure to increases in computing power.

Not surprisingly, automation has begun to impact the appraisal process. Recent guideline changes allow lenders to consider several appraisal options for your home purchase or refinance.

At the top of the list, a full appraisal with pictures, comparable sales and measurements is commonly called a "1004" because of the form number Fannie Mae assigns to such a report. A faster and cheaper way of doing an appraisal is sometimes called a "drive by," where the appraiser will verify recent home sales in the area to justify the new home's value, "drive by" the home to assure it's there, and -- from the outside at least -- have reason to suggest that the property is good collateral for a loan.

Another choice is the "Minimum Value Assessment." The MVA verifies the existence of the structure through previous recordings and again justifies value using recent home sales in the neighborhood. This last method relies almost exclusively on electronic data about home sales in the area -- there are no pictures, no measurements, and no adjustments.

Each form of appraisal has a different cost. Less work for the appraiser means less money the consumer has to pay for property valuation. Which report do you need? Typically it's an underwriting decision that determines what's required, and these decisions are usually made by an Automated Underwriting System, a software program that decides if the borrower is qualified to buy the home and what documentation is required to close the loan. If your approval only requires a Minimum Value Assessment then you shouldn't have to pay for a full appraisal.

Relatively few loans today are approved requiring only the drive-by method, and still fewer use the minimum standards. Sometimes the use of less than a full appraisal can mean more than $100 in loan savings. As technology improves and data becomes more reliable, the traditional appraisal as we know it may largely vanish.

Some buyers still want a full appraisal -- regardless of the loan requirements -- to assure that a home really has a certain level of value. A sale agreement, for instance, might require a home to appraise at a certain value -- less and the deal is off or must be re-negotiated.

At your application, your loan officer may have asked that you pay for your appraisal in advance, so you hand over $300 or so for the appraisal. But what if your approval only requires a "drive by" appraisal that costs $150?

You have a choice at this stage: You can accept the drive-by appraisal or ask that a full appraisal be performed. If you ask for a full appraisal then you'll pay the full $300 fee -- but if you only want the drive-by appraisal that costs $150 then you should expect a refund for any excess appraisal charge.

Lenders and mortgage brokers are forbidden to "up charge" for third-party services. In other words, if the appraisal only costs $150 but the lender collected $300, they can't keep the change. They have to give it back.

For more articles by David Reed, please press here.

Published: January 4, 2002

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, a veteran Mortgage Banker, successful Real Estate Consultant and author of Your Guide to VA Loans, Mortgages 101: Quick Answers to Over 250 Critical Questions About Your Home Loan, Who Says You Can't Buy a Home!, and Mortgage Confidential: What You Need to Know That Your Lender Won't Tell You, is a former columnist and Contributing Editor with San Diego-based Mortgage Originator Magazine. Reed is President of CD Reed Mortgage Bankers, Austin, TX and is a Past President of the Austin Mortgage Bankers Association.