Financial Planning and Analysis

Who Is Responsible for Scheduling a Home Appraisal?

Uncover the different parties responsible for scheduling a home appraisal, whether it's your lender or you directly.

A home appraisal provides an unbiased estimate of a property’s market value. This evaluation, conducted by a licensed appraiser, considers various factors such as the home’s condition, size, location, and recent sales of comparable properties. The appraisal report serves as a professional assessment, distinct from a home inspection, which focuses on the property’s structural and mechanical condition.

Lender-Initiated Appraisals

In most mortgage-involved real estate transactions, the lender is responsible for ordering the appraisal. This practice protects the lender’s investment by ensuring the property’s value adequately supports the loan amount, mitigating financial risk if the borrower defaults. Federal regulations, including provisions from the Dodd-Frank Act and the Truth in Lending Act, mandate appraiser independence to prevent undue influence and ensure appraisals are based solely on professional judgment.

Lenders typically do not directly select an appraiser; instead, they often use Appraisal Management Companies (AMCs). AMCs act as independent intermediaries, managing a network of licensed appraisers and assigning them to appraisal requests. This system helps maintain objectivity and compliance with appraiser independence requirements.

While the lender orders the appraisal, the borrower is responsible for paying the appraisal fee. These fees commonly range from $300 to $600, though they can be higher for government-backed loans or unique properties. The appraiser schedules an on-site visit and delivers the report to the lender within 6 to 20 days.

Owner or Agent-Initiated Appraisals

There are several situations where a homeowner or their real estate agent may choose to schedule an appraisal independently. One common reason is to obtain a pre-listing valuation before selling a property, which helps in setting a realistic asking price. Appraisals are also frequently sought for property tax appeals, providing an independent assessment to challenge a high property tax assessment. Other scenarios include estate planning to determine asset values for inheritance, divorce proceedings for equitable asset division, or private sales where no mortgage is involved. Homeowners might also seek an appraisal to remove private mortgage insurance (PMI) once sufficient equity has been established.

In these instances, the homeowner or their agent hires a licensed appraiser. Finding a qualified professional can involve searching online directories, seeking referrals from real estate agents or attorneys, or consulting professional appraisal organizations. The client negotiates the appraiser’s fee and receives the appraisal report. Unlike lender-initiated appraisals, no federal appraiser independence regulations apply, as no financial institution is extending credit. The costs for such appraisals are in a similar range to those ordered by lenders, typically between $300 and $600.

Previous

How to Get Rid of Car Loan Debt: Actionable Steps

Back to Financial Planning and Analysis
Next

Can You Have Primary and Secondary Dental Insurance?