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The cost of an appraisal typically runs between $300 and $600. Since it is a non-refundable fee, the appraiser will be entitled to payment whether or not you end up purchasing the property.
The survey and the home inspection are similar costs that also won't be refunded if the deal falls through.
If you've gotten all the way to the appraisal stage, you're probably set on purchasing the home, so it can be devastating if something happens that prevents the deal from proceeding.
A deal can fall apart at the appraisal stage for a variety of reasons, but the most likely culprit is a low appraisal amount. If the appraiser determines the appraised value is far lower than you are planning on paying for it, the bank will not give you a mortgage until the accurate property value is reflected in the sale price.
If the seller refuses to lower the price or the potential buyer is no longer interested in buying the home after the findings of the appraisal, the deal could easily fall through.
So who's responsible for paying an appraisal fee normally? And who is responsible if the appraisal falls through? Read this handy guide by insurance broker Jerry to learn who's responsible for paying the appraisal fee in any situation.
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Who pays for appraisal?
The buyer is responsible for hiring the appraiser and paying for their services upfront.
Therefore, most of the time, the buyer is responsible for paying the appraisal fee—this includes paying for appraisal if the deal falls through.
When the buyer is responsible
The buyer, by default, is responsible for the appraisal fee. There are some situations where this might be the case—such as when the seller agrees to pay for closing costs including appraisal fees.
The seller might agree to pay all closing costs (which the appraisal could potentially be grouped under), but if the deal falls through and closing never happens, the buyer will likely be left paying for the appraisal out of pocket. The buyer will also lose their earnest money deposit if they put one down.
When the seller is responsible
Not all hope is lost if you're the buyer. Here are some ways a buyer could potentially recoup the appraisal fee if the deal falls through.
If the seller has already paid for an appraisal
If a seller has an appraisal done before listing their home and the bank does not require another one, then the buyer would not be liable for the cost.
Keep in mind, this is a very rare occurrence. The bank will require an extremely recent appraisal to consider giving you a mortgage. In this scenario, instead of a full appraisal, the lender may require confirmation from the appraiser that the property is in the same condition.
If you agree on an appraisal contingency
If you are concerned about the home appraisal being too low, there are ways you can protect yourself from losing money. Before the appraisal is conducted, discuss what the seller is willing to do if the appraisal comes back too low.
If the seller agrees to pay the appraisal if the deal ends up falling through, have your real estate agent or lawyer write up an appraisal contingency. If you have an air-tight contract, you will be entitled to the appraisal fee even if the deal falls through; however, it’s important to keep in mind that if the seller is receiving multiple offers, it is very unlikely to agree to an appraisal contingency.
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