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What is a property appraisal?

A property appraisal is an independent professional assessment of a property’s market value, conducted by a licensed appraiser. In mortgage lending, appraisals serve several critical purposes:
  • Risk assessment: Lenders need to verify that the property is worth at least as much as the loan amount. If a borrower defaults, the lender must be able to recover the loan amount by selling the property.
  • Loan-to-value (LTV) calculation: The appraisal value determines the loan-to-value ratio, which affects pricing, eligibility, and required mortgage insurance.
  • Regulatory compliance: Government-sponsored enterprises (GSEs) like Fannie Mae and Freddie Mac, as well as other investors, require appraisals to ensure loans meet their standards.
Traditionally, appraisals have been expensive, time-consuming, and disruptive to borrowers. Pylon’s waterfall approach automatically selects the most efficient and cost-effective appraisal type based on loan eligibility and property characteristics, minimizing costs and time while ensuring compliance with all guidelines and investor requirements.

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Understanding the appraisal waterfall

The waterfall approach evaluates appraisal options in a specific order, automatically selecting the first option for which the loan qualifies. This ensures borrowers only pay for and wait for the level of appraisal actually required, rather than defaulting to the most expensive option.
1

Appraisal waiver

Pylon first checks if the loan is eligible for an appraisal waiver. If eligible, no property inspection or valuation report is needed. The loan can proceed immediately without any appraisal cost or delay. This is the fastest and most cost-effective option.
2

Desktop / hybrid appraisal

If not eligible for a waiver, Pylon evaluates eligibility for a desktop or hybrid appraisal (also called a Collateral Desktop Appraisal or CDA). These appraisals use property data, public records, and comparable sales with minimal or no physical inspection, making them faster and less expensive than full appraisals.
3

Full appraisal

If the property is not eligible for a waiver or desktop/hybrid appraisal, or if guidelines require a full appraisal, Pylon automatically orders a full appraisal programmatically via API. Full appraisals require a physical inspection of both the interior and exterior of the property.

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Appraisal types explained

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Appraisal waiver

An appraisal waiver (also called a property inspection waiver) eliminates the need for any property inspection or valuation report. Instead of sending an appraiser to the property, the lender relies on automated underwriting systems and property data to determine that the loan meets risk standards. Pylon automatically determines waiver eligibility based on:
  • Fannie Mae and Freddie Mac AUS recommendations: Fannie Mae and Freddie Mac are government-sponsored enterprises (GSEs) that purchase and guarantee most conventional mortgages. Their Automated Underwriting Systems (AUS) analyze loan risk and may recommend waivers for low-risk loans with strong borrower profiles and property data.
  • Takeout partner requirements: Takeout partners are investors who purchase loans after origination. Different investors have different waiver eligibility criteria, and Pylon evaluates against all relevant partners.
  • Loan characteristics and property data: Factors like loan-to-value ratio, borrower credit score, property type, and property data quality all influence waiver eligibility.
Benefits: Appraisal waivers are instant (no waiting period), completely free for borrowers, and reduce closing costs. They’re available for many conventional loans with strong borrower profiles, low loan-to-value ratios, and properties with sufficient data in automated systems.

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Desktop / hybrid appraisal (CDA)

A Collateral Desktop Appraisal (CDA), also called a desktop or hybrid appraisal, is a streamlined valuation that combines automated valuation models (AVM) with appraiser review. Unlike full appraisals, CDAs require minimal or no physical inspection of the property. How CDAs work:
  • Automated valuation models: AVMs use algorithms to analyze property data, public records, recent sales of similar properties (called “comparable sales” or “comps”), and market trends to estimate property value.
  • Appraiser review: A licensed appraiser reviews the AVM results, property data, and comparable sales to validate or adjust the valuation.
  • Limited inspection: Some CDAs may include a limited exterior inspection (drive-by or exterior-only inspection), but interior inspections are not required.
When CDAs are used: CDAs are typically available for properties with:
  • Sufficient property data in public records
  • Recent comparable sales in the area
  • Standard property types (single-family homes, condos)
  • Lower-risk loan profiles
Cost and timeline: Desktop/hybrid appraisals cost approximately $350 and typically complete within 3-5 business days, making them significantly faster and less expensive than full appraisals.

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Full appraisal

A full appraisal (also called a traditional or standard appraisal) requires a licensed appraiser to physically inspect both the interior and exterior of the property and produce a comprehensive appraisal report. What full appraisals include:
  • Physical inspection: The appraiser visits the property to assess its condition, features, size, layout, and any issues that could affect value.
  • Property analysis: Detailed analysis of the property’s characteristics, including square footage, number of bedrooms and bathrooms, lot size, age, condition, and any improvements or defects.
  • Comparable sales review: The appraiser identifies and analyzes recent sales of similar properties in the area (typically 3-5 “comps”) to determine market value.
  • Comprehensive report: A detailed written report documenting the property’s value, the methodology used, and supporting data.
When full appraisals are required: Full appraisals are necessary when:
  • The loan doesn’t qualify for a waiver or CDA
  • Guidelines require a full appraisal (e.g., certain loan types, high loan-to-value ratios)
  • Property data is insufficient for automated valuation
  • The property type is non-standard (e.g., unique properties, commercial elements)
Jumbo loans: Jumbo loans (loans that exceed conforming loan limits set by Fannie Mae and Freddie Mac) often require 2 full appraisals from different appraisers. This provides additional risk protection for larger loan amounts. Pylon automatically orders both appraisals when guidelines require it, at a total cost of approximately $1,500.
Cost and timeline: Full appraisals cost approximately $750 and typically take 5-10 business days to complete, depending on appraiser availability, property access, and market conditions.

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When appraisals are ordered

Appraisals are automatically ordered by Pylon when specific conditions are met. Understanding this timing helps you set proper expectations with borrowers and plan your integration. Appraisals are triggered when Intent to Proceed (ITP) is received. Once ITP is received, Pylon automatically orders an appraisal if:
  1. The loan is eligible for appraisal ordering: The loan must meet basic requirements (e.g., property address is valid, loan amount is determined, etc.)
  2. No waiver is available: Pylon first checks for waiver eligibility. If a waiver is granted, no appraisal is ordered.
  3. The appropriate appraisal type is determined: Based on the waterfall evaluation, Pylon orders the appropriate type (CDA or full appraisal).
See Order-Outs Overview for details on Intent to Proceed (ITP) and when all order-outs (appraisals, title, income verification, etc.) are triggered.

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Payment and borrower experience

Pylon handles all aspects of the appraisal process programmatically, creating a seamless experience for both borrowers and lenders.

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How payment works

Pylon pays upfront: Pylon covers the cost of the appraisal immediately when it’s ordered, ensuring there are no delays waiting for borrower payment. Borrower charged at closing: Appraisal costs are included in the borrower’s closing costs: the fees and expenses paid at the loan closing. The borrower pays these costs as part of the final loan settlement, not upfront. Net of loan wire: When the loan funds (the lender wires money to escrow), the appraisal cost is deducted from that wire, so the borrower’s net cash at closing reflects the appraisal cost. This is standard practice in mortgage lending.

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Borrower benefits

No payment links or vendor emails

Borrowers do not receive payment links, invoices, or emails from appraisal management companies or appraisers. Pylon handles all vendor communication and payment, keeping the process simple and professional.

No upfront payment required

Borrowers don’t need to pay for appraisals upfront. The cost is included in closing costs, paid at closing along with other fees. This removes a common friction point in the loan process.

Seamless automated process

The entire appraisal process, from ordering to vendor selection to payment to status tracking, is handled programmatically. No manual coordination, phone calls, or emails required from your team.

Instant ordering upon ITP

Appraisals are ordered instantly when ITP is received, with no delays for payment processing or manual review. This gets the appraisal process started immediately, reducing overall loan timeline.

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Appraisal costs summary

Appraisal TypeCostTimelineWhen Charged
Appraisal Waiver$0InstantN/A
Desktop/Hybrid (CDA)~$3503-5 business daysAt closing
Full Appraisal~$7505-10 business daysAt closing
2 Full Appraisals (Jumbo)~$1,5005-10 business daysAt closing
Payment timing: All appraisal costs are included in closing costs and charged to the borrower at closing, not upfront. Pylon pays vendors immediately to ensure instant ordering and seamless borrower experience.

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Tracking appraisal status

You have two options for tracking appraisal status and receiving updates:

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Option 1: email notifications

You can subscribe to email notifications for appraisal updates. These emails are sent to the Loan Officer (LO) assigned to the loan file and provide updates on key milestones:
  • Appraisal ordered: Confirmation that the appraisal has been ordered and which type (waiver, CDA, or full)
  • Appraisal inspection scheduled: For full appraisals, notification when the property inspection has been scheduled (so you can inform the borrower)
  • Appraisal completed: Notification when the appraisal is complete and the report is available
  • Appraisal issues or delays: Alerts if there are problems accessing the property, delays, or other issues requiring attention
Email notifications are ideal if you want passive updates without building polling logic into your system.
Please reach out to your account manager if you’d like for us to configure out of the box notifications to your LOs for you.

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Option 2: API polling

For custom notifications, integration into your system, or real-time status updates, you can poll the API for appraisal status: 
query {
  loan(id: "loan_abc123") {
    tasks {
      id
      type
      status
      title
      description
      metadata
    }
    subjectProperty {
      appraisal {
        status
        type
        orderedAt
        completedAt
        paid
        value
        cost
        appraiserName
        report {
          id
          url
          value
          completedAt
        }
        error {
          message
          code
        }
      }
    }
  }
}
See Tracking Loan Updates for detailed implementation of polling for loan status and task updates, including best practices for polling intervals and error handling.

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Understanding appraisal status values

The appraisal status field indicates where the appraisal is in the process. Understanding these statuses helps you track progress and set borrower expectations:
StatusDescriptionWhat This Means
WAIVER_GRANTEDAppraisal waiver was approved, no appraisal neededThe loan qualified for a waiver. No appraisal will be ordered, and there’s no cost or delay.
ORDEREDAppraisal has been ordered from vendorThe appraisal has been submitted to an appraisal management company or appraiser. The process has started.
INSPECTION_SCHEDULEDProperty inspection has been scheduledFor full appraisals, the appraiser has scheduled a time to visit the property. You should inform the borrower.
INSPECTION_COMPLETEDProperty inspection is completeThe appraiser has finished the physical inspection. The report is now being written.
IN_REVIEWAppraisal report is being reviewedThe appraisal report has been submitted and is being reviewed for quality and compliance.
COMPLETEDAppraisal is complete and report is availableThe appraisal is finished, the report is available, and the property value has been determined.
CANCELLEDAppraisal was cancelledThe appraisal was cancelled (e.g., loan was withdrawn, property access issues).
FAILEDAppraisal encountered an errorThe appraisal failed due to an error (e.g., property access denied, data issues). Check error details.

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Best practices

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Setting borrower expectations

Help borrowers understand what to expect based on the appraisal type:
  • Waiver: “Great news: your loan qualified for an appraisal waiver, so there’s no appraisal cost or waiting period.”
  • Desktop/Hybrid: “Your appraisal will be completed in 3-5 business days. You won’t need to be home, as this type of appraisal doesn’t require a property visit.”
  • Full Appraisal: “An appraiser will need to visit your property within the next 5-10 business days. We’ll let you know when it’s scheduled so you can arrange access.”

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Monitoring and polling

  • Poll regularly but not excessively: For full appraisals, polling every 2-4 hours is reasonable. For CDAs, polling every 4-6 hours is sufficient. Waivers are instant, so no polling is needed.
  • Handle delays proactively: If an appraisal status remains in INSPECTION_SCHEDULED or IN_REVIEW for longer than expected, check for issues and work with Pylon support if needed.
  • Use email notifications as backup: Even if you’re polling via API, email notifications provide a good backup and alert system.

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Explaining costs to borrowers

  • Emphasize no upfront payment: Borrowers often worry about paying for appraisals upfront. Clarify that appraisal costs are included in closing costs, paid at closing.
  • Explain the waterfall: Help borrowers understand that Pylon automatically selects the most cost-effective option, so they only pay for what’s actually required.
  • Set expectations for Jumbo loans: If it’s a Jumbo loan, explain that two appraisals may be required and why (additional risk protection for larger loans).