Reader question: “I am about to list my home for sale. I know the buyer’s mortgage lender will send an appraiser to have the home appraised (if they are using a mortgage lender). But who pays for a home appraisal when selling a house? Does the seller have to pay for it?”
You’re right about the buyer’s lender. They will certainly have a property appraisal done, probably within a few days of receiving the signed purchase agreement. They want to know what the home is worth in the current real estate market, to make sure they are not “over-investing” in the property.
But getting back to your question: Who pays for the appraisal when you are selling a house?
The Buyer Usually Pays for the Appraisal, But Not Always
The first thing to realize is that everything is negotiable when it comes to a real estate purchase, and that includes the home appraisal fee. In a buyer’s market, buyers can often get the seller to pay this and other closing charges. In a seller’s market, it doesn’t happen nearly as much — and for obvious reason. So it varies in large part based on local real estate conditions.
With that said, it is usually the buyer who pays for the appraisal in a home selling situation. After all, it is the buyer’s mortgage lender who has requested to have the property appraised.
But even when a lender is not being used (as is the case with an all-cash buyer), the appraisal still serves the buyer more than the seller. It shows them how much the home is worth in the current market. It prevents them from overpaying, or from starting off with negative equity from day one. It benefits the buyer primarily, so it is usually their expense to pay.
Just remember what I said about the differences between a sellers’ market and a buyers’ market. In a situation where there are many homes listed for sale, but not much demand, sellers will typically go “above and beyond” to sell their houses. And this often means paying the cost of the appraisal, as well as other closing-related fees.
In most cases, the seller does not even see the appraisal. They grant the appraiser access to the home and then basically stay out of the way. The report goes straight back to the lender so they can compare it to the purchase agreement, and see if they want to move the loan forward.
The buyer typically pays for the appraisal. And they usually have to pay for it up front, instead of at closing. These days, many appraisers want to be paid when the review is actually completed. That’s because they know a lot of loans don’t even make it to closing. So they want to get paid at the time of services rendered. So it’s more of an upfront cost these days.
So that answers the question: Who pays for a home appraisal when selling a house? If you have additional questions, feel free to send them to us. As always, we will do our best to help. You can also respond directly by using the “comment” link below.