What’s Required for a Hard Money Appraisal?
7 minute read
June 7, 2023


Seizing lucrative real estate investments in the market requires agility and quick decision-making.

However, traditional financial options may not always align with your need for speed or flexibility in securing new investment properties.

This is where hard money loans come into play, providing a swift solution to secure properties efficiently, often giving investors money in as little as three to five days.

But before you can dive into hard money loans, understand the key requirements of hard money appraisals.

In this article, we’ll dive into the specifics of what’s required for hard money appraisals to equip you with the knowledge to navigate this critical aspect of the investment process.

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What is a hard money appraisal?

A hard money appraisal is a professional assessment of a property’s value conducted by a licensed and insured appraiser.

The appraisal isn’t just another box to check off — it’s a cornerstone of the hard money loan journey.

Lenders rely on the appraisal to determine the loan amount and ensure the money lent aligns with the property’s true market value, protecting both the lender and the borrower.

FAQs about a hard money appraisal

What is the purpose of a hard money appraisal?

The main purpose is to assess the current market value of a property. This assessment is used by hard money lenders to determine the loan-to-value (LTV) ratio, which influences the total loan amount.

Typically, good loan-to-value ratios should be no greater than 85%, with most hard money lenders offering loan amounts of 65% to 85% of the collateral property’s value.

Who conducts the hard money appraisal?

The hard money appraisal is conducted by a professional appraiser who is licensed, insured and has no direct interest in the transaction to ensure an impartial evaluation that’s fair for both parties.

What is the difference between a hard money appraisal and a traditional appraisal?

Traditional appraisals focus on the property’s condition and similar houses in the area. In contrast, a hard money appraisal takes into consideration the potential value of the property after repairs and renovations, known as After Repair Value (ARV).

How long does a hard money appraisal take?

The process of scheduling the appraisal, waiting for the appraiser’s visit, and receiving the final appraisal report typically takes a few days to a week to complete. The appraiser report is typically completed and delivered to the lender and borrower shortly after the property visit.

What appraisers look for: the key components

Appraisers accurately assess the value of a property by looking at three key components:

  1. The property itself
  2. The local real estate market surrounding the property
  3. Comparable sales of similar homes in the same area

Let’s dive a bit deeper into these.

The property

The property is the main aspect of any appraisal.

Appraisers will examine the property’s physical condition, such as:

  • Structural integrity
  • The state of repair or disrepair
  • Quality of existing renovations
  • Size of the lot or yard
  • The square footage of the living space

Additionally, appraisers note any unique features or improvements that could add value, such as a swimming pool, or a renovated kitchen or bathroom.

The real estate market

The local real estate market can significantly impact a property’s value outside of its condition.

Appraisers will consider important factors such as the desirability of the neighborhood, local amenities, and trends in property values.

They’ll also take into account economic factors that could influence the local real estate market, such as job growth in the area or recent changes in the mortgage interest rates.

Comparable sales

Also known as “comps,” comparable sales are the recent sales of similar properties in the local area.

To provide an accurate assessment, appraisers seek out comps that are as similar as possible to the property being appraised in terms of size, age, style, and location.

Typically, appraisers will look for properties that have been sold within the last 3-6 months and are within a 2-mile radius of the property being appraised.

By comparing the sales prices of these comps, they can estimate the market value of a property.

4 property requirements for a hard money appraisal

To ensure a successful hard money appraisal, there are specific requirements that must be met. These requirements serve as guidelines for both the appraiser and the borrower.

1. Licensed and insured appraisal

First, the appraisal must be conducted by a licensed and insured professional who has been certified through the state’s regulatory agency or appraiser board.

Additionally, appraisers may need to commit to ongoing continuing education requirements to maintain their licenses and stay updated on industry standards and practices.

2. Comparable properties

Appraisers require at least three comparable properties, or comps, to help them assess the property’s value.

These comparable properties need to be within a 2-mile radius of the property and must have been sold within the past 3-6 months.

3. Non-rural property

Hard money loans are used for properties in urban or suburban areas — not rural areas.

This is because rural properties’ values can be harder to assess due to a lack of comparable sales and because of the variable nature of rural real estate markets.

4. Investment property

The property being appraised cannot be the borrower’s primary residence.

Hard money loans are designed for investment properties, such as rental properties, apartment buildings, multi-family homes, and other properties being renovated for resale.

If an investor plans on living on the property, they should explore traditional financing options such as conventional mortgages, FHA loans, or VA loans. These types of loans are designed for owner-occupied properties and have different terms and qualification requirements.

The appraisal report

The appraisal report is the essential deliverable in the hard money lending process.

The report provides a comprehensive and detailed assessment of the property’s value to help support the lender’s decision-making and provide transparency to all parties involved.

The following is a list of what is typically included in the report.

Property Description

The report includes a thorough description of the property, such as the physical characteristics, amenities, improvements, and notable features that could affect its value. Property photos are also included for reference. This is especially important when a property is going to be flipped, as it is helpful to see the before and after.

Market analysis

The appraiser will include an analysis of the local real estate market, such as recent trends, marketing conditions, and other factors influencing property values.

Comparable sales data

The report will show a list of details about comparable sales used in the valuation process including details about the comp properties, their recent sales prices, locations, and relevant characteristics.

This information supports the appraiser’s justification for the estimated value of the property.

Final appraised value

Lastly, the appraiser report concludes with the final determination of the property’s value.

This appraised value becomes a reference point for the lender to determine the loan-to-value ratio and establish the final loan amount.

Work with Park Place Finance on a hard money appraisal

Are you a real estate investor seeking to secure a property quickly with a hard money loan? Park Place Finance can make all the difference.

Our dedicated team understands the urgency and unique needs of real estate investors.

With our experience in hard money lending and strong partnership with licensed and insured appraisers, we are here to provide you with reliable and accurate appraisals.

Trust Park Place Finance as your reliable partner. Contact us today at (866) 407-1599 to explore our hard money lending options and benefit from our expertise in the appraisal process.

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