Who Pays for the Appraisal?

As a real estate appraiser in California, I often hear this question, and the answer is almost always the same.

It’s the client who pays for the home appraisal. But who is the client you ask?

Keep reading to find out. 

Home appraisal process

The home appraisal process will differ depending on what you need the appraisal for. The most common scenarios are for real estate transactions and refinancing a property.

Real Estate Transactions

Appraisals are commonly used in real estate transactions as a way for a lender to make sure the property is worth what the buyer is paying.

The buyer’s lender will order the appraisal on their behalf. 

The lender will typically use an appraisal management company that hires out the appraisal order to a local appraiser that covers the area. 

The appraiser will reach out to schedule the inspection with the real estate agents, who will facilitate the inspection on the seller’s behalf. 

During the inspection, the appraiser will measure the property, take photos on the exterior, take photos in all rooms inside, and take notes based on their observations.

Here is an appraisal checklist if you’re at this step in the process.

The appraiser will then take the inspection information back to their office and use it to write the appraisal report. 

Once the inspection is complete, you will likely not hear from the appraiser again unless they have further questions. 

The appraiser will deliver the report to the appraisal management company (AMC) which will review it and ship it back to your lender.

The entire process can take anywhere from a few days to a few weeks depending on how busy all parties involved are. 

Refinance

In a refinance, the appraisal process is very similar to a purchase.

The lender will order the appraisal through an appraisal management company. The appraisal management company (AMC) will assign the appraisal to a local appraiser.

The appraiser will set up an appointment with you to come to inspect the property.

They will measure the property, take photos inside and out, and take notes.

Once they have all the information they need, the appraiser will write the appraisal report at their office.

The appraiser will submit the completed report to the AMC, which will review it and send it back to the lender.

You should be informed of communications at all stages, and once the appraisal is complete, you can obtain a digital copy from your lender.

Private Appraisal

A private appraisal is an appraisal that doesn’t involve a lender. Think appraisals for an estate, market value, divorce, tax appeal, etc.

In these situations, the process is more condensed. You will most likely deal with the appraiser directly throughout the entire process. 

The inspection will be the same or similar, but the communications and payment will be between you and the appraiser directly. 

You can find appraisers by using Google or third-party sites like Yelp, Angi, Thumbtack, and others.

Home appraisal cost

The home appraisal cost can vary greatly depending on a number of factors. 

Some of these factors are location, the complexity of the property, the purpose of the appraisal, market conditions, and what the appraiser typically charges. 

No fees are set for a house appraisal at a federal or national level. Just like other service providers, the cost depends. 

On the lowest end, you can expect to pay $300-$400 for an appraisal of a standard single-family residential home. 

On the high end, you could end up paying several thousand dollars.

As with anything, you get what you pay for. 

If you survey a number of appraisers in an area, the ones that are on the higher end most likely (But not always) put more time and thought into their appraisal reports. 

They will spend more time getting accurate measurements and information, and they will spend more time making sure the value is as reliable as possible.

On the low end, the appraiser will likely cut corners, provide fewer details, and do the bare minimum needed to produce the report.

Who pays for an appraisal when buying a home?

Photo Holding Keys

Whether you are a first-time home buyer or a seasoned homeowner, when it comes to the home buying process, the person who pays for the appraisal is almost always the same. 

It’s the home buyer.

The home buyer is responsible for covering the cost of the appraisal because they are the ones that need the loan. The home appraisal ensures that the home is worth what the buyer is paying. 

This is the case in most purchase transactions. However, in certain situations like the ones below, this might not be.

  1. If the home buyer is paying all cash, then there is no need for a loan and thus, no need for an appraisal. 
  2. If the buyer works out some kind of concession in the contract that the seller pays for the appraisal, they wouldn’t have to pay. 
  3. If the buyer uses a private lender, they might pay for the appraisal if that was the agreement.

In most cases, the home buyer pays for the appraisal.

Who pays for an appraisal when selling a home?

When it comes time to sell your house, there is a lot you might have to pay for. 

You will most likely pay the real estate agent commissions. In addition, you could also have to pay for inspection repairs, staging, updates, etc. 

All these items can really add up. But do you have to pay for the appraisal too?

The answer is almost always no. 

The appraisal is used by the lender in a real estate transaction to verify that the house is worth the sale price. Lenders need appraisals to make the loan.

For this reason, when it comes to selling your home, the buyer is responsible for the appraisal because the buyer is the one that needs the loan.

Unless it is written into the contract that you the seller has to pay for the appraisal, it is one less thing you have to worry about.

Even if the sale doesn’t go through, the buyer is still responsible for the cost of the appraisal.

Who pays for an appraisal when refinancing?

Refinancing is essentially when you replace your existing mortgage with a new one. There are different types of refinancing, and the following applies to all of them.

Refinancing is common when the interest rates are low because homeowners can get a lower interest rate on their mortgage. This lower interest rate can potentially save them a significant amount of money in the span of a 30-year mortgage.

But when it comes to refinancing, who pays for the appraisal?

9 times out of 10, you, the borrower pays for the appraisal when refinancing. The borrower is responsible for the cost of the appraisal because they are the ones that need the loan.

You may be able to find a direct lender or private lender that will cover the cost of the appraisal, but in most cases, the borrower will be the one that has to pay.

It makes perfect sense if you think about it. You are the client, and you are the one that needs the loan. 

Other times when an appraisal is needed

The most common uses for a real estate appraisal are for a real estate transaction between a buyer and seller and for refinancing. 

There are other times when an appraisal is needed. 

Appraisals can be used to determine the value of a property for an estate. They can be used for a property tax appeal. They can be used for a divorce. They can even be used by a curious buyer or seller before the transaction.

In all of these situations, you will work directly with the appraiser and have to pay for the appraisal. 

Conclusion

When it comes to the question, “Who pays for the appraisal?” it is almost always the same answer. 

It is the person who needs the appraisal. You, the client.

When buying and selling property, the borrower pays for the appraisal. 

When refinancing a property, the borrower pays for the appraisal. 

When getting a private appraisal, the person that ordered the appraisal pays for the appraisal. 

In any case, the cost of an appraisal is a small price to determine a property’s value.

Founder, Principal at Realvals
Austin Fernald writes about the Bay Area and Northern California real estate market, as well as the real estate appraisal industry as a whole.
Austin Fernald

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