A home appraisal is an assessment of the value of a house that is conducted prior to a sale. Although uncommon, it is possible for a seller to pay for a home appraisal as part of the the listing process, but the it is normally the lender who contracts to have a home appraised and the buyer pays this expense as part of the closing costs. The requirement for a home appraisal prior to a loan approval helps to ensure that a bank doesn't extend a $100,000 mortgage on a $80,000 home using the undervalued home as collateral because in the case of a default, the bank would be facing a $20,000 loss.
A seller and his or her real estate agent can take several steps before a home appraisal to ensure that the property is not under valued, but there is no longer any chance for either the seller or the buyer to influence the selection of appraisers. The booking of a home appraisal is managed by the lending institution that works through an appraisal management company (AMC) to select impartial appraisers.
A home appraisal starts at around $200 with averages between $277 and $357 but costs can come in over $1,200 for an appraisal depending on the the home and the market. There is no uniform price for a home appraisal for two primary reasons.
According to Kelly Kellogg, a Florida-based appraiser and author of ABCs of a CMA, Comparative Market Analysis, the cost of a home appraisal will be determined by the scope and size of the home appraisal process, including the home's size, features, area market rates and the existence of comps.
- Size and features will determine the number of measurements a home appraiser needs to take during the appraisal process as well as complicate the calculations required. A home with more square footage will require more labor from an appraiser and thus come at a higher cost. The home appraiser may be presented with a set of measurements and notes from a seller, but it is up to the appraiser to verify this information and establish their own measurements of square footage, rooms and specific features and problems associated with the property.
- Market rates for home appraisals vary across the country with certain regions coming in at the low range of appraisal costs while others trending to the higher range even for similar properties. While a home appraisal may cost $350 in an area of the country with a lower cost of living, a higher cost of living area may see costs over $500 for similar home appraisals.
- Comparable nearby homes are another influencing factor in the scope of a home appraisal. The value itself of the nearby homes is not the primary factor for the cost of the appraisal but instead the existence of similar homes nearby that were recently sold and which act as a benchmark for market value. With a unique home, the use of comps becomes more difficult and raises the scope of the research required of the home appraiser and thus the cost.
Home appraisals vary in cost based on the scope, complexity and real estate market market. Buyers can generally expect to see higher home appraisals in their closing costs for homes that are larger or unique.