Who Pays for an Appraisal? From Home Sales to Estates
Navigate the complexities of appraisal payments. This guide clarifies who bears the cost in diverse valuation circumstances.
An appraisal is a professional, unbiased estimate of an asset’s value, typically performed by a qualified and independent third party. This process provides an objective valuation, offering a neutral viewpoint valuable in various financial and legal contexts.
Residential Real Estate Appraisals
In residential real estate, the responsibility for paying for an appraisal often rests with the buyer, especially when a mortgage is involved. Lenders generally require an appraisal to confirm the property’s value supports the loan amount, safeguarding their investment. Appraisal fees for a single-family home typically range from $300 to $500, though this can vary based on factors like location, property size, and complexity. This cost is frequently included as part of the buyer’s closing costs, although it may sometimes be paid upfront. While the buyer usually covers this expense, a seller might occasionally agree to pay the appraisal fee as a concession during negotiations, particularly in a buyer’s market.
When homeowners refinance their mortgage, they are responsible for paying for the appraisal. Lenders require this valuation to assess the current market value of the collateral securing the new loan. Refinance appraisal costs generally range from $300 to $500, with some sources indicating an average of around $500. The borrower typically pays this fee, which is part of closing costs.
For new construction loans, the borrower usually pays for appraisals, which may involve multiple valuations throughout the building process. Appraisals for government-backed loans, such as FHA, VA, or USDA loans, may cost more than conventional loan appraisals due to stricter requirements, ranging from $400 to $775 or higher. For cash purchases, a lender does not mandate an appraisal as there is no loan to secure. If a buyer chooses to obtain an appraisal for their own due diligence, they pay for it.
Other Appraisal Scenarios
Appraisals are also needed in various non-real estate situations, with the payer determined by the purpose and nature of the valuation. In divorce proceedings, appraisal costs for marital assets like real estate or businesses are often split between the divorcing parties. One spouse might pay initially, with the cost factored into the final asset division or a court order determining responsibility. A divorce home appraisal costs between $300 and $800, depending on the property’s characteristics.
For estate planning and probate, appraisals of estate assets, such as real estate or valuable personal property, are typically paid for by the estate using estate funds. This helps determine the fair market value for tax purposes and equitable distribution among heirs. When a homeowner disputes their property tax assessment, they typically pay for an independent appraisal to support their appeal. This personal investment aims to provide a professional valuation that can be presented to tax authorities to challenge an over-assessment.
For insurance claims, an appraisal may be needed to determine the value of damaged property or valuable items. The policyholder is typically responsible for paying for their appraiser, while the insurance company pays for theirs. If the two appraisers cannot agree, a neutral umpire may be brought in, with the cost of the umpire typically split equally between the policyholder and the insurer.
Business valuations, performed for purposes like sale, succession planning, or litigation, are generally paid for by the business itself or the owner requesting the valuation. The cost of a business appraisal can vary significantly, ranging from $2,000 to $10,000 for smaller businesses, but potentially reaching $50,000 to $100,000 or more for larger or more complex entities. The complexity of the business and the specific methodology required influence the final cost.