Whether you are buying or selling a home, you may find yourself needing to learn more about appraisal fees, what they are, and why you are being expected to pay for this added expense. To better understand why you are paying appraisal fees, it is helpful to first gain a better understanding of what they are.
What are Appraisal Fees?
Appraisal fees are those costs that are associated with having a professional appraiser evaluate a home in order to estimate its market value. Generally speaking, appraisal fees typically run anywhere from $300 to $450 for a single-family home, though the final price will depend upon the appraiser as well as the location of the property and the complexity of the appraisal.
Why is an Appraisal Necessary?
Appraisals are typically required by mortgage loan lenders as a condition of approving the loan. This is partly because the lender wants to ensure the value of the home is at least as much as the amount of the loan. After all, if you are requesting a $250,000 loan on a home that is only worth $200,000, the lender would be risking losing $50,000 if you default on the loan.
While the lender may require an appraisal to be conducted in order to protect its investment, getting an appraisal completed also helps to protect you as a buyer for the same reasons. No matter how much you may be in love with the home, paying $250,000 for a property that is only worth $200,000 is not a good deal for you either.
Similarly, even the seller has something to gain by having the home appraised. By knowing the actual value of the property, the seller can avoid being low-balled on the sell of the property and can be sure to negotiate a fair price
When is an Appraisal Completed?
A house appraisal is typically completed after an offer on a home has been made and accepted but before the actual closing. Ideally, the appraisal should take place following the house inspection.
Who Completes the Appraisal?
Appraisals are conducted by professional appraisers who are not directly linked to the lender. While the lender may have a recommended and trusted appraiser to direct you toward using, the appraiser is not financially linked to the deal. In other words, the appraiser has nothing to gain or to lose if the appraised value does not come out to be what you had hoped it to be. This lack of financial or emotional attachment helps to ensure the appraiser provides an unbiased assessment of the value of the home.
How Does the Appraiser Determine the Value of the Home?
To determine the value of the home, the appraiser will conduct a property walk-through to take measurements and otherwise determine the condition of the home. The appraiser will also compare the home to other similar homes in the area before creating a final report.
Who Pays the Appraisal Fee?
Typically, the appraisal fee is paid by the person who is purchasing the home. It is possible, however, for the seller to be responsible for this fee if it is agreed upon as part of the price negotiations.