Who Should Pay For The Appraisal? February 23rd, 2007
Closing costs always seem to be a mystery.? Most people say we will just split the closing costs 50/50.? But it?s not that easy! There are certain costs that are traditionally seller?s costs, and certain that are traditionally buyer?s costs.? In?some loan programs it is mandatory that the sellers pick up certain costs. Here are the costs usually paid by the buyer:
- All Loan Fees. These include commitment fees, origination fees, points, credit reports, and lock fees.
- Mortgage insurance.? Or VA funding fees, or rural development fees if required.
- Reserves account.? This is to pay the taxes and insurance as they come due.
- Lenders title insurance.? This is not the Owners Title Insurance paid by the seller
- Home owners insurance
- Inspection fees.? For their home inspection
- Flood review Read the rest of this entry »
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Marty Van Diest, Tele 907.232.7900 / marty[at]valleymarket[dot]com
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Marty…..
I’m an appraiser in WA State. Are you certain that an appraisal of a residence to be purchased is paid by the ’seller’? From my experience, Federal banking regulations & FNMA standards prohibit the specific hiring of an appraiser by anyone directly benefitting the outcome of the transaction. Most banks now place appraisal requests from a department separate from the ‘production’ person, i.e, the salesperson. Independent Mortgage Brokers are a different situation, however. Your post is the first I’ve seen in nearly 6 years that says the ’seller’ pays for the appraisal…but perhaps AK is different than all other states.
OK…here is how it works. The seller does not pay the appraiser directly. The lender actually cuts a check to appraiser. But the lender requires someone to reimburse them, and they want that money up front, not at the closing.
In fact usually the lender will not order the appraisal until they recieve the check from the seller. So the seller pays the lender and then the lender pays the appraiser.
Right now, Wells Fargo is about the only local lender ordering the appraisal from another “department”. The third party vendor charges a fee as well, so the appraisal cost increases from $600 to as much as $800 and still the seller foots the bill.
Marty -
?I too am an appraiser and Dave is 100% correct! Either the lender or the buyer (indirectly at closing) is responsible for the appraisal fee. . . NOT the seller.
Wells Fargo may be YOUR only “local” (?) lender that is currently separating the appraisal ordering process from loan production . . .but that is definitely the national trend.
The topic of “Appraiser Indpendence” is delt with here: http://tinyurl.com/356t4p
Regulators are concerned about recent exam findings that indicate some financial institutions are IGNORING guidelines dating back to FIRREA that require independence in the appraisal and evaluation functions, and they have recently issued interagency guidance to remind financial institutions about the requirements. Click here for the Interagency Guidance memo for the OCC: http://tinyurl.com/2l9s2a
Brian J. Davis
http://www.OurAppraisal.com
http://www.AppraisalScoop.com (Blog)
For those of you not familiar with our local market here. Yes, the Seller typically pays for the appraisal. It is an oddity and Marty is absolutely right, it makes no sense. It is more of a tradition that has yet to be permanently broken.
The seller pays the appraisal either out of pocket or at closing. Wells Fargo processes all appraisals through a 3rd party ordering system to ensure segregation of both the lender and the realtor’s from the appraisal process. This ensures an independent 3rd party valuation. Under no condition is the seller allowed to pick an appraiser, no can anyone else in the process really.
The spirit of the process is fully intact. It is just the financial responsibility that is a throw-back contrary to most modern markets.
[...] The appraiser will determine value. The appraiser works for the lender, but their fee is paid by the buyer…or seller. The appraiser is NOT an inspector and cannot be depended upon to find hidden defects in a house. But if the appraiser does call out a safety problem the issue will almost always have to be addressed to keep the transaction from falling apart. And if the appraisal comes in below the sales price, you have big issue, however, we can usually find a way to work through it. [...]
[...] have written before about this issue… Who Should Pay For The Appraisal I think the time has come for this to [...]