When buying, selling, or refinancing a home, an appraisal is almost always a required step in the process. The appraisal verifies the fair market value of the home so the lender can approve the appropriate loan amount. The buyer usually pays for the home appraisal, but it also depends on the situation, whether it’s Charlotte, North Carolina or Salt Lake City, Utah.
Who pays the appraisal fee?
In almost all financed home purchases, the buyer is responsible for paying for the home appraisal, even if the lender mandates that the property be worth more than the loan amount.
After you lock in your rate, you typically pay the appraisal fee before closing. In some cases, a credit for fees and charges may be collected at closing, but most lenders will require payment upfront before an appraisal is made.
Average appraisal cost: $400 – $900
Who orders: Your lender
Purpose: To determine the value of a home for mortgage approval.
The appraisal is done early in the loan process, so once the report is complete, the fee is usually not refundable, even if your loan is denied, the deal doesn’t close, or you change lenders.
Why don’t sellers pay for a home appraisal before listing?
Although appraisals may seem like they help sellers set an accurate listing price, they are often considered an unnecessary expense for sellers, and appraisals are primarily a tool for lenders. Lenders require an appraisal to confirm the value of the home to qualify for a loan, while sellers use a real estate agent’s Comparative Market Analysis (CMA) to set the listing price.
CMA, known as Comp, provides a free, data-driven estimate of a home’s market value based on similar recent sales, current listings, and local trends. This is quick and flexible and adjusts to your pricing strategy, while the valuation is a more stringent loan-based valuation, although both can be affected by rapidly changing housing markets.
That being said, some sellers choose to order a pre-listing appraisal if:
But for most sellers, a professional pre-listing appraisal is an unnecessary cost, especially since the buyer’s lender will require a new appraisal anyway once the offer is accepted.
Who decides the appraisal fee?
Buyers do not actually choose an appraiser or research prices. Most lenders work with an appraisal management company (AMC) who acts as an intermediary between the lender and the licensed appraiser.
AMC assigns a local appraiser to value the property and sets the appraisal cost based on the size and location of the home, type of property, and complexity or uniqueness of the process.
These fees are standardized within each lender’s network to keep the process fair and compliant with federal lending laws. This setting helps prevent potential conflicts of interest between the lender and the appraiser (for example, the lender cannot pressure the appraiser that the home is worth a certain amount).
Because of this system, appraisal fees may vary slightly from lender to lender, but they cannot be negotiated with the appraiser himself. The appraiser sends the invoice to the lender, who then passes it directly to the buyer.
What happens to the appraisal fee if the transaction is unsuccessful?
Essentially, an appraisal is a non-refundable step in the due diligence process, similar to a home inspection fee.
Even if the sale doesn’t go through due to financing issues, inspection results, change of plans, etc., the buyer still pays the appraisal fee if an appraisal has already been done. Once the appraiser has inspected the home and issued a report, the service is complete and you are responsible for all costs.
Can I transfer my rating to another lender?
Buyers may change lenders midway through the transaction if they find a better rate elsewhere or are denied financing. In some cases it is possible to carry over the appraisal, but if a new appraisal is required by a new lender, the buyer will have to pay again. The loan type and individual lender’s policies will determine whether a completed appraisal will be transferred.
Conventional loans: Relocation may be allowed if the new lender accepts the same appraisal and management company (for example, if you are buying a home in the same area). FHA, VA, or USDA loans: These are typically assigned to real estate and can be reused within a set period of time.
If the seller may pay a home appraisal fee
In most cases, buyers pay for the home appraisal, even if the initial appraisal period has expired or the lender has changed. However, if the appraisal is low and there is a contingency appraisal for the buyer, the cost of the second appraisal will likely be borne by the seller who disputes the report.
In some cases, and in other special circumstances, the seller may agree to pay the appraisal fee.
Seller Concessions: To attract a buyer or close a sale, the seller may offer to pay some or all of the appraisal fee as a seller credit. Low Appraisal Negotiations: If the appraised value is lower than the purchase price, the seller may seek a second appraisal or compromise on the difference between the appraised value and the asking price to get the home purchase back on track. New Homes: Construction companies may include appraisal fees as part of closing incentives or as a negotiation tactic.
Do I have to pay the appraisal fee in advance?
In most cases, yes. Buyers pay for the home appraisal before the home appraisal is completed, at the time the order is placed, to avoid payment or processing delays. However, the fee will be listed as part of your closing costs and you will receive a credit to indicate that it has already been paid. Even if negotiations include paying the appraisal fee, the appraisal fee must be paid upfront on the credit provided at closing.
When refinancing, homeowners pay an appraisal fee
When you refinance your mortgage, your lender will request a new appraisal to find out the current value of your home. This helps let the lender know that your property supports the loan amount you’re applying for, especially if local values change or you upgrade your home.
A refinance appraisal shows how much equity you have and helps lenders calculate the loan-to-value ratio, which affects refinance terms and interest rates. As with purchase appraisals, fees must be paid in advance and cannot be refunded after appraisal.
conclusion
In most cases, the buyer or homeowner pays for the home appraisal, but the lender is protected. This is a typical borrower expense and is part of the cost of securing a mortgage. You may be able to negotiate for the seller to cover the appraisal fee, but it’s best to budget for it in advance. Also, keep in mind that once the appraisal is complete, there are no refunds.
Tip: Want a head start before paying the appraisal fee? Find out what your home is worth with Redfin’s home value estimator and see how it compares to similar homes in the area.
Frequently Asked Questions: Who pays for the home appraisal?
What happens if I don’t pay the appraisal fee?
If you do not pay the appraisal fee, you will not be able to proceed with the financing process. Lenders require an appraisal before approving or financing a mortgage, and most lenders will not schedule an appraisal until the fee is paid. Failure to pay your home appraisal may delay the closing of your loan or cancel your loan application.
Why do I need to pay in advance for the home appraisal?
Buyers pay upfront for the home appraisal. This is because lenders require the report early in the loan process to keep things on time. This fee covers the appraiser’s work and cannot be rolled into your loan balance because the appraiser is an independent third party. Paying before the appraisal ensures that the report is completed on time, confirms the loan amount, and ensures that the appraiser is paid even if the loan does not close.
Will I still pay the appraisal fee if my loan is denied or I don’t buy the home?
yes. Even if the loan is not approved or the transaction fails, you will still have to pay the appraisal fee if the service is completed.
Who pays the second appraisal fee?
The buyer usually pays the cost of the appraisal, unless the seller wants to order another item to counter the negative appraisal.
Who decides the appraisal fee?
The appraisal management company sets the cost depending on the type of real estate, market conditions, and time required.
How can I get a free appraisal of my home?
You can’t get a formal home valuation for free, and you’ll need an accredited valuation for financing purposes. However, you can find out how much your home is worth by using free tools like the Redfin Home Value Estimator or by asking your real estate agent to perform a comparative market analysis. If you’re refinancing, cheaper appraisal options may be available, such as a desk appraisal or an on-site appraisal.
