Tuesday, March 29, 2011

Upfront Appraisal Fee!? To Pay or Not to Pay!?

Buyers ask all kinds of questions, but the one that I hear THE MOST, is: "is it normal for the lender to ask me to pay for the appraisal fee upfront or prior to closing?"

In fact, just last week I was asked this question by two of my buyers. It's almost a guaranteed question - it comes up with 8 out of 10 buyers. Here's the answer - it's normal and okay - no worries! While it's up to each lender, majority of lenders require that the buyer pay for the appraisal up front as opposed to at closing as part of the closing costs. If a loan is involved, an appraisal is always required. In this area, the cost is typically $375-450. If something happens and the deal falls apart, the appraiser still has to be paid - no matter if the sale goes through or not. If the lender didn't collect the fee upfront, he/she would be eating appraisal fees left and right and at $400 a pop, that can get expensive pretty quickly.

If you have a good agent and lender working for you, they should be able to help protect you when it comes to the appraisal. For instance, it's probably not wise to pay for an appraisal on a short sale until after the bank has provided written short sale acceptance. Short sales don't always work out, so if you paid $400 for an appraisal only to find out that the bank refuses the short sale, that's $400 wasted. One of my preferred lenders protects buyers by not ordering (& charging!) for the appraisal until after the buyer has done their inspection and feels confident that they want to move forward with the deal (so long as time permits). What if the inspection reveals major issues and you decide to terminate the contract? If the appraisal has already been completed, you just lost $400.

Every scenario is different, so it's important to have a good agent and a good lender to help protect you! But the general answer to the question is yes, it's okay to pay the fee upfront. If I were a buyer, I would have the same question! It's never wise to cut checks or give out your credit card info for reasons you're unsure of!  

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