The cost of a home appraisal is typically a closing cost that's paid in advance by a homebuyer at loan inception and after offer acceptance. Home appraisal costs can run from $300 to $450 for a single-family home in 2020, but fees can vary depending on the location of the property, the complexity of the appraisal process, and by location.
The cost is also driven by market demand, and by the appraiser's experience.
What Is an Appraisal?
An appraisal is essentially an opinion on the value of a property, but it's not as arbitrary as that might sound. It's based on certain criteria that are often state-regulated, and the appraiser should state in the appraisal report the process that was used.
Most lenders require an appraisal for home sales in excess of $400,000 as of 2020.
Appraisers must be licensed or certified by the state in which they work. Each state has an appraisal board and the individual must pass an exam provided by the board for licensing, but other requirements can vary.
Appraisals aren't absolute guarantees of value. They're a professional's opinion of value, following standard protocols.
Different Types of Appraisals
Conventional, FHA, and VA appraisals don't cost the same. There's often at least a $50 difference between a conventional appraisal and an FHA appraisal. FHA appraisals are more expensive.
That's due in part to the additional requirements and guidelines for an FHA loan. An FHA appraisal might require more "loan conditions"—repair requirements that must be made before funding the loan because FHA loans carry stricter guidelines than conventional loans.
You might see some homes with peeling paint or deferred maintenance advertised as "conventional only."
Saving on a Home Appraisal
The best time to bring up the cost of an appraisal is when you're ready to choose a mortgage broker. Pretty much all mortgage loans cost about the same unless you're dealing with a disreputable lender. There's very little difference between interest rates and points. The difference is in service.
Sometimes lenders will offer to pay for the buyer's appraisal as an additional enticement. It doesn't hurt to ask.
When Homes Appraise at Sales Price
Appraisers aren't immune to the fact that both the buyer and the seller are counting on a home to appraise at the agreed-upon contract value. An appraiser can't base an appraisal on the sales price, but don't make the mistake of believing that they're insensitive to that issue.
Appraisers receive a copy of the purchase offer. They try to find comparable sales that will meet the appraised value.
Sometimes an appraiser won't assign a higher value to the property because it's unnecessary if the home is worth more than the sales price. The property only has to be worth at least the sales price, and the lender might take the position that the appraisal is non-conforming and refuse to make the loan if the value is a lot higher.
What to Do If You Don't Agree
An appraisal isn't "wrong" simply because it comes in at a higher or lower value than you expected, but you do have options if a value comes in that seems significantly off.
Most lenders have a system in place called a "Reconsideration of Value." You can also file a complaint with the state appraisal board, but you might want to pay for a second appraisal first to be absolutely sure that the first was really off.
An appraisal situation in California involved an FHA loan. FHA appraisals are assigned a case number so the next buyer will receive the same appraisal if the initial transaction falls through. The appraisal management company therefore called the lender to warn that the appraisal would be $100,000 less the sales price and asked if the lender wanted the appraiser to continue.
The lender thanked the company and chose a different appraiser, but the second one produced an appraisal at almost the same value. It was still $95,000 less. But it's always possible that a second appraiser will use different comparable sales and produce a higher value.