Anticipating House Appraisal Costs

Home appraisal costs are fees paid to a licensed appraiser to determine the current market value of a property. Your lender will require a home appraisal if you’re getting a mortgage. The average cost of a home appraisal is $500. Here’s what to know about appraisals.

Why You Need a Home Appraisal

Why You Need a Home Appraisal

The home appraisal determines the fair market value of a property. Lenders require them before approving mortgages to avoid lending out more than a home is worth. Appraisal contingencies that allow buyers to back out of deals with their earnest money deposits are used with mortgages. While a buyer is permitted to back out if there’s an appraisal gap, they may also choose to negotiate a lower price with the seller that is in line with the property’s appraised fair market value. 

What’s Included in House Appraisal Cost

The appraisal fee pays for the time and expertise of the appraiser. The appraiser visits the home in person to conduct an appraisal inspection. Evaluations cover the following:

  • Room-by-room walk-throughs to judge a home’s basic condition
  • Property tour to judge exterior condition
  • Assessment of curb appeal
  • Assessment of special features
  • Evaluations of layout and square footage
  • Assessment of upgrades and improvements
  • Confirmation of single-family status
  • Citations for safety or health violations

Next, the appraiser evaluates the home in relation to the current local market. Using comparable local properties that have sold within the past 90 days, the appraiser will determine a fair market value for the home.

Average Cost of House Appraisal

Professional appraisals fees are regulated by the 2010 Dodd–Frank Wall Street Reform and Consumer Protection Act. Under the law, an appraiser’s fees must be reasonable and customary based on pricing in the local market. The average appraisal fee for a single-family home in the United States is between $300 and $500. The cost for an appraisal could be as high as $500 to $800 in areas with higher costs of living. The biggest factors influencing cost for an appraisal include:

  • Property Size: The extra time needed to assess a large property increases appraisal price.
  • Condition: Homes with extensive damage and issues require more time and effort from the appraiser.
  • Available Comps: Isolated homes may require longer appraisal times because fewer comparable properties are available for data mining. Unique, custom, or historic properties may be more expensive to appraise because appraisers can’t easily refer to “comp” properties to make value determinations.
  • Time of Year: Snow coverage, ice, and other seasonal conditions can make accessing parts of a property challenging for appraisers.

Unlike other professionals used for closing services, the appraiser can’t necessarily be “shopped for” by the buyer. Federal laws prevent buyers and sellers from choosing appraisers themselves. Selecting the appraiser is the mortgage lender’s job.

Due to laws forbidding lenders from being affiliated with appraisers, most mortgage companies use third-party appraisal companies with long rosters of certified, licensed appraisers.

Professional appraiser credentials can be verified using the Federal National Registries list.

The Buyer Covers Home Appraisal Costs

While appraisals are ordered by mortgage lenders, homebuyers cover the fees. Appraisal fees are generally counted as part of the buyer’s closing fees. Based on your lender’s rules, the fee can be due either ahead of closing or at closing.

What Appraisal Costs Don’t Cover

Buyers are not paying appraisers for advice. An appraiser is intended to be a 100% neutral third-party professional. Their job is only to assign a home a fair market value based on data. They are not permitted to provide advice regarding a buyer’s decision to purchase a home. They also cannot state their opinion on the seller’s asking price versus market value.

While an appraiser is permitted to speak with the seller and their agent during the appraisal process to get information about a property, they do not work on behalf of the seller.

A Home Inspector Is Paid Separately

An appraisal’s findings are not to be used in place of an actual home inspection report from a licensed home inspector. While mortgage lenders don’t typically make home inspections mandatory, they are highly recommended because they give buyers crucial insights into issues with a home’s structure, foundation, or core systems. The average cost of a home inspection around the country is between $400 and $600. 

Unlike a home appraiser, a home inspector is selected by the buyer.

After the Appraisal

A lender is required by law to provide the appraisal at least three days before the scheduled closing date to allow the buyer to carefully review it.

Under Consumer Financial Protection Bureau (CFPB) rules, borrowers can receive a free copy of a home appraisal report. They are also entitled to copies of documentation used for valuation.

Paying for More Than One Appraisal

Appraisal reports used to qualify for mortgages are good for 120 days. If an appraisal expires because the buyer and seller don’t close on time, the lender may require a second appraisal at the expense of the buyer.

If an appraisal comes in too low to allow the deal to go forward as intended, the buyer may petition the lender to order a second appraisal. If the lender agrees, the second appraisal will be billed to the buyer. While inaccurate appraisals are rare, rapid market conditions, a unique property, or an inexperienced appraiser could all skew appraisal results.

First-time homebuyers should factor in at least an extra $500 in closing costs to account for appraisal fees. Your lender will schedule the appraisal on your behalf. If you’re planning to purchase a home with cash, you can choose to waive the appraisal to make your offer more attractive to the seller. However, this puts you at risk of overpaying for a home. 

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Written by Murat

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Don’t Be Confused About Home Inspections and Appraisals