Appraisals are an important part of the property-buying process. For buyers, they ensure you're making a smart investment of your money, and for mortgage lenders, they protect against risk.
But how much does a home appraisal cost? And will you be on the hook for those expenses on your next purchase? Here's what you need to know.
Why do you need a home appraisal?
Home appraisals are typically required by mortgage lenders. But even if you aren't financing your property, you still might want one just to be safe.
An appraisal is a professional assessment of a property's fair market value, given its age, condition, square footage, features, and current market conditions, among other factors. The appraiser will evaluate your property, do a comparative market analysis with other similar homes in the area, and determine how much the property is worth.
In a nutshell: An appraisal will tell you if a home is actually worth what you've offered to pay for it.
What does the appraised value mean?
If the home's appraised value comes in above (or at) what you offered for it, then you're golden. You're making a smart decision and a good investment of your money.
If the appraisal comes in low? Then you have a problem. If you're paying cash for the home, you may want to back out of the deal (if you have an appraisal contingency in place) or renegotiate with the seller for a lower sale price.
If you're using a mortgage lender to finance the property, you'll have a few options with a low appraisal:
- Pay the difference between your offer price and the appraised property value. Your lender will only loan you up to the appraised amount.
- Renegotiate with the seller. There's a chance they may let you only pay the appraised value, or you might be able to negotiate a number somewhere in the middle.
- Back out of the transaction. If you have a property appraisal contingency in your contract, you should be able to back out of the sale altogether.
If you're not sure what the best decision is for your specific scenario, make sure to talk to a real estate agent in your area. They can advise you on the best steps moving forward.
How much does a home appraisal cost?
The average real estate appraisal costs between $300 and $450 nationally, though costs can vary by region, size of the property, and other factors.
Here are just a few of the factors you can expect to impact your appraisal's cost:
- The property's age and condition.
- The property's size.
- The features/amenities on the property.
- Labor costs in your area.
- Damage to the property.
- Seasonal conditions.
- How hard it is for the home appraiser to access the property.
- Any improvements or renovations done to the property.
- The density of the market (and the amount of comparable sale data there is to compare the home to).
Generally, anything that makes the appraisal take longer or more complicated will mean a higher cost. There are limits, of course, and according to the Dodd-Frank Act, the fees must be considered "customary and reasonable" for your specific market.