If you are buying a home today, you need to be prepared to pay more for your appraisal than you originally anticipated.
That is simply the nature of the current housing market. Mortgage lenders everywhere are raising fees in order to get the increasingly more limited supply of appraisers to accept their appraisal orders.
Here is a breakdown of why home appraisal costs are so high today, and some tips on how you can minimize the cost of your appraisal.
What Is A Home Appraisal?
An appraisal is simply a valuation of a piece of real estate. The appraiser determines the market value of the home based on their knowledge of the local property market. This involves comparing the home with recent sales of other, similar, nearby homes. But it also involves a judgment of how the property matches up to those homes.
Why Are Home Appraisal Costs So High?
Here are a few of the main reasons why appraisal costs are increasing.
Inflation is obviously a major reason, as $1 in 1990 is worth the same as $2.08 today. However, this alone would only account for an increase of a couple hundred dollars in an appraisal price tag.
2. Appraisers Have Higher Fees
This relates to inflation, but appraisers themselves have much higher fees now too for licensing, insurance, vehicle costs, software, continuing education, and more.
3. Appraiser Shortage
This is the main reason appraisal costs are so high today.
Appraisers are aging out and retiring, and new people are not coming into the industry because of the difficult licensing and training requirements The recent dip in interest rates has also created a surge in refinances that take up appraisers’ time.
Appraisals are the only unregulated piece of the real estate settlement services pie, and unfortunately some bad appraisers can take advantage of the situation – and there is often little your lender can do about it. Because they are overworked, they can command the fees and work schedules that they want.
How High Are Appraisal Costs Today?
Appraisal costs have risen from as low as $250 in the early 1990s to over $1,000 now for a standard appraisal.
And for large homes, remote locations, unique properties, or areas where appraisers are in particularly short supply, these fees can easily exceed $2,000.
How Can You Avoid Higher Appraisal Costs?
Unfortunately, higher baseline appraisal costs are here to stay for awhile until housing demand decreases or more appraisers enter the job market.
However, there are a few things you can do to avoid increases in fees throughout your homebuying process.
1. Allow plenty of time.
Rush appraisal fees are expensive.
2. Be flexible.
Inflexibility can be costly – especially in today’s market. If you can be willing to move contract deadlines when things do not go as planned, you can avoid being blindsided with increased fees.
3. Know the WHY.
Before accepting new fees, make sure you ask your lender or agent what the fees are for. Sometimes we can search for a different appraiser with better fees if there is enough time.
The Bottom Line
Thanks to inflation and a shortage of appraisers, high appraisal costs are unlikely to go away any time soon. However, if you plan for these fees beforehand and make sure you are flexible with your contract deadlines, you can minimize the cost of your appraisal.
To help you navigate today’s competitive housing market, NEO Home Loans has created a program called the Bulletproof Buyer program. It’s a four-step process that makes you the most likely potential buyer to get into a home and gives you an unfair advantage if you’re competing in the housing market. The program includes creating a solid Appraisal Gap strategy at the beginning of the loan process so if your appraisal does come in low, you are prepared to pivot and continue your home purchase without any delays.
If you would like to learn more about appraisal fees and what they might add up to for your home loan, fill out the form below to request a consultation with one of our mortgage advisors.