Who Hires the Appraiser and Who Pays for It?

An appraisal provides an impartial, professional opinion of a property’s value, important in various financial and legal scenarios. This independent assessment is often necessary for transactions like buying or selling real estate, securing financing, or resolving legal disputes. The specific party responsible for engaging the appraiser and covering the associated costs largely depends on the appraisal’s purpose. While one entity might pay the fee, the appraiser’s professional obligation remains to deliver an unbiased and objective valuation, irrespective of who initiates the service.

Hiring in Real Estate Transactions

In the context of real estate transactions, particularly those involving a mortgage, the lender typically orders the appraisal. This is an important step for the lender to protect their investment by ensuring the property’s value supports the loan amount. Borrowers usually pay for this appraisal as part of their closing costs, which can range from $300 to $800.

Lenders often utilize Appraisal Management Companies (AMCs) to select a qualified appraiser for the assignment. This mechanism helps maintain a degree of separation between the lender and the appraiser, fostering independence in the valuation process. The AMC acts as an intermediary, ensuring the appraiser is chosen from a pool of qualified professionals without direct influence from the lender or other transaction parties.

For cash transactions or private sales, either the buyer or the seller may choose to hire an appraiser directly. This occurs when there is no lender requiring an appraisal, but the parties wish to establish a fair market value for negotiation purposes. Similarly, during a mortgage refinancing process, the lender will again order an appraisal to confirm the property’s current value against the new loan terms, with the borrower covering the fee.

Hiring in Other Valuation Contexts

Beyond standard real estate transactions, appraisers are engaged for diverse valuation needs. In divorce proceedings, attorneys, the divorcing parties, or a court might hire an appraiser to determine the fair market value of marital assets, such as real estate, businesses, or personal property, for equitable distribution. The cost of such an appraisal is often split between the parties involved.

For estate planning and probate, executors, trustees, or beneficiaries commonly hire appraisers to establish asset values as of a specific date, often the date of death. This valuation is used for determining inheritance or estate taxes and facilitating the distribution of assets among heirs. The estate bears the cost of these appraisals.

Property owners seeking to challenge a property tax assessment frequently hire an appraiser. The appraiser provides an independent report that serves as evidence to support an appeal to the local tax authorities, aiming to reduce the property owner’s tax liability.

For insurance claims, either the insurance company or the policyholder might engage an appraiser to assess the damage or value of insured property after a loss. If parties disagree on the amount of loss, each can hire their own appraiser, and these appraisers may then select a neutral umpire to resolve differences.

Business owners, buyers or sellers, and legal teams hire appraisers for business valuation. This process determines the worth of a company for purposes such as mergers, acquisitions, litigation support, or strategic planning.

Appraiser Independence

Appraiser independence is a key principle supporting the reliability and integrity of the valuation process. Appraisers adhere to strict ethical codes, notably the Uniform Standards of Professional Appraisal Practice (USPAP), which mandate impartiality, objectivity, and independence. These standards prohibit appraisers from basing their valuations on predetermined outcomes or succumbing to undue pressure from any party.

A lack of independence can lead to inaccurate valuations, undermining public trust and resulting in legal challenges or disciplinary actions against the appraiser. Regulations, such as Appraisal Independence Requirements (AIR) for residential mortgage transactions, are in place to safeguard this impartiality by restricting communication and influence between appraisers and parties. While a party might be the “client” who engages the appraiser and pays, the appraisal’s findings are intended to be objective and reliable for all intended users, not for the hiring party’s benefit.