You’re under contract, have completed inspection, objection, and resolution. Your loan is very close to being funded, all that’s left is the appraisal. Just as every other inspection has a price, the appraisal also has some costs associated with it. So what is the cost of appraisals and can you shop around?
]The cost for home appraisals today varies a bit by geographic region, but it has always varied too by the complexity of the assignment. It takes a lot more time to appraise a custom home in the mountains, for instance, than to appraise a tract home in the city.
Of course, this makes perfect sense. It would be very easy to compare a house in a subdivision to another house the exact same size and floor plan, with extremely similar finishes, conveniently located directly across the street. Conversely, it would be much harder to try to figure out the value of a home if there wasn’t another home like it anywhere.
The appraisal tells your lender how much the home is worth. The appraiser uses recently sold homes in the immediate area and compares them to the home you are buying in order to come up with a value. If there aren’t any recently sold homes like yours, any recently sold in your area, or both, their job is infinitely more difficult. Some areas of difficulty that are more time consuming for your appraiser may affect the home appraisal cost.
An appraisal seems like an easy place to game the system. Simply hire someone you know already and make sure the appraisal comes in where you need it to. Before the current regulations went into effect, this is exactly what people did.
In 2008 new regulations put a firewall between mortgage originators (loan officers/any production folks) and the appraisers to make it impossible for stakeholders to influence the appraisal.
Today we have to order the appraisal through an online portal via the lender’s website. (Mortgage companies and banks do the same, so it isn’t any different. The originator cannot choose or have any contact with the appraiser.)
The lender engages an independent Appraisal Management Company (AMC), which maintains a panel of independent appraisers throughout the country. An appraiser may belong to several, if not dozens, of AMC panels. The loan officer is not even allowed to talk to the appraiser, much less influence them in any way.
There are several implications to this organization: The customer may not shop for the appraiser. The appraiser is selected independently and only through this system.
There is no cost difference between refinancing and purchase transactions, although, as noted above, there could be differences for complexity or scope. For instance, if you are buying a rental property, the appraiser will be asked to complete a rental survey in addition to the appraisal — obviously, the home appraisal cost will be higher.
In the past, I’ve recommended that sellers give a cheat sheet of sorts to the appraiser when they get there, including measurements of their home and a list of improvements along with information about the neighborhood, explaining any homes that sold recently for a less-than-market price for reasons not readily apparent. On my street, I know of three houses that sold last year for significantly less than they should have for reasons that would not be known to someone who wasn’t in tune with the latest neighborhood news.
Hampson says, “I do meet the appraiser when it’s my listing and always bring comparable’s. Sometimes they appreciate it.” I would always recommend doing this. If they don’t look at the comparable’s you bring, you haven’t really lost out on much. But if they do take them into consideration, you can control the process a bit more.
Every single piece of property is 100 percent unique — there will never be two properties that are exactly alike. However, the more unique your property is, the more difficult it will be to value, and the higher the chances are that your appraisal will come in low.
The cost of appraisals will run between $350 and $600 for a home that is easier to appraise — and could run much higher for a unique property. Shopping around for the best price isn’t really an option, so focus on making your home look its best, and ask your agent for a list of favorable comparable’s to share with the appraiser.
Here is another resource from our friends at Realtor.com regarding appraisals: Appraisal Info
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