Who Pays for the Appraisal and Why This Key Homebuying Step Is Worth Every Penny

How do market conditions influence my appraisal?

The housing market directly affects your home’s appraised value. Appraisers look at recent sales, but in rapidly changing markets, those sales might not fully reflect today’s value.

• Hot Market (Seller’s Market): If home prices are rising quickly, past sales might not capture the full appreciation.
• Slow Market (Buyer’s Market): If prices are dropping, an appraiser might be more conservative to avoid overvaluation.
• Seasonal Trends: Appraisals can fluctuate based on seasonal demand, with spring and summer generally seeing higher values.

Understanding these market factors can help you prepare for potential appraisal surprises.

What is the difference between a home appraisal and a home inspection?

In some ways, buying a house is like learning a new language. You’ll learn jargon you’ve never heard before, like earnest money, escrow, and title search.

Let’s brush up on the difference between two important terms: home appraisal and home inspection. Although they might sound similar, they are distinct steps that most buyers will encounter as they move through the home buying process.

A home appraisal:

• Assesses the property’s value, specific to the unique characteristics and location of the home
• Gathers information to protect the home buyer and the lender’s investment by comparing the value to others in the market and what is being offered to purchase the home

A home inspection:

• Gathers information to protect the buyer’s investment
• Seeks to identify issues that could reduce the home’s value or cause significant costs for the owner, such as a leaky roof, mold, electrical problems, or structural integrity
• Assesses the property’s condition

Who pays for a home appraisal?

It’s the buyer’s responsibility to pay for the home appraisal. Typically, the lender requires the payment upfront, but in some cases, the fee may be included in your closing costs. In rare cases, the seller may cover the appraisal cost to sweeten your deal.

According to Spray, appraisals typically range from $400 to $600 for his central Florida clients. Nationally, the average home appraisal is about $357.

The exact cost will vary based on the home’s location, square footage, and condition. If your desired home has characteristics that require the appraiser to be on site for longer than usual, the cost may go up.

If your contract falls through (and more on that later), you shouldn’t expect a refund on your appraisal, unfortunately.

Who conducts a home appraisal?

Your home appraisal is conducted by a person called an appraiser. This is a third-party certified or licensed contractor, hired by your lender (often through an appraisal management company). Appraisers must meet congressionally authorized standards and qualifications, plus any qualifications set by the state in which they are based.

Appraisers are well-versed in the real estate field and understand the different factors that must be weighed to evaluate a property, such as neighborhood growth, housing trends, and market conditions.

In conducting your appraisal, the appraiser will typically walk through the house to look at your home-to-be’s structural condition, the size of the property, the layout, recent upgrades, amenities, and any necessary repairs.

Lisa Meinczinger, an appraiser in Greenfield, Indiana, says she spends about 15 to 20 minutes walking through a well-cared-for house, taking pictures and measurements. But that’s just the tip of the iceberg when it comes to each of her appraisals.

“When I get back to the office is when the work begins,” she says.

Meinczinger has worked as an appraiser since 1998. She conducts over 300 appraisals in a busy year.

To finalize her appraisals, she looks at market conditions, checks tax records, and compares recent home sales of similar properties. She’ll also check her measurements against those provided in the listing, making sure there aren’t any discrepancies.

“[Real estate agents] will say this is a 6,000-square-foot home, but 3,000 of it is in the basement,” says Meinczinger. And since below-ground basements cannot be added to the calculation of a home’s living space, she has to make that correction on the appraisal.

The appraiser will fill out a standard home appraisement form, often Fannie Mae’s or Freddie Mac’s Uniform Residential Appraisal Report, to share with the lender. Your lender should provide you with a copy of the appraisal within about seven business days (possibly longer if your market is particularly busy).

Can you choose your own appraiser?

While the lender is responsible for arranging the appraisal, the buyer can insist on a highly qualified appraiser. In fact, that’s advice straight from Daniel Crehin, owner of Crossland Appraisal Service, which provides commercial and residential appraisal services on the West Coast.

“Get a good, reputable appraiser,” he says. His recommendation is that once your lender has scheduled your appraisal, make sure your appraiser is a member of the Appraisal Institute.

Another way to inspect an appraiser’s credentials is to see if they have any professional designations. Crehin, for example, has an MAI (Member Appraisal Institute) designation, while Meinczinger’s credentials include the SRA (Senior Residential Appraiser) and AI-RSS (Appraisal Institute, Residential Review Specialist) designations. These indicate additional education and experience.

You can examine your appraiser’s credentials by visiting the National Registry of Appraisers and by looking at the Appraisal Institute’s database.

Understanding your appraisal

You’ve just received a copy of the appraisal from your lender. One step closer to closing day and moving into your new home! Let’s talk about the different scenarios that accompany your appraisal outcome.

Did the appraisal come in higher than the offer the seller accepted? That’s good news for the buyer, says Spray.

“It means congratulations to the buyer because you bought a house that has built-in equity in it, according to the appraiser,” he says.

How does an appraisal affect your mortgage approval and loan terms?

The appraisal plays a crucial role in your loan amount and terms. Lenders use the home’s appraised value to determine how much they’re willing to lend. If the appraisal comes in higher than the purchase price, it’s great news — you instantly gain equity! However, if it comes in lower, it can create financing issues.

Here’s what might happen with a low appraisal:

• You’ll need to pay the difference between the appraised value and the purchase price.
• You can renegotiate with the seller for a lower price.
• Your loan terms might change, requiring a higher down payment.

What can you do if the appraisal comes in too low?

What if the appraisal comes in lower than the amount you told the seller — and your lender — that you would pay?

According to the January 2025 Realtors® Confidence Index Survey from the National Association of Realtors, 5% of contracts were delayed due to appraisal issues. Though contract terminations due to appraisal concerns don’t happen as often, you’re certainly not alone if this happens to you, and this can be a stressful situation for any buyer.

If your appraisal is lower than expected, don’t panic! There are a few different paths forward:

• Request a Reconsideration: Provide additional comparable sales (comps) that might justify a higher value.
• Negotiate with the Seller: Ask them to lower the price to match the appraised value. You can also agree to split the difference with the seller. For example, if the appraisal is $10,000 off from the offer price, the seller can accept an offer that’s $5,000 lower while you add $5,000 to your down payment.
• Make Up the Difference: If the lender won’t adjust the loan, you can pay the gap in cash.
• Get a Second Opinion: You can also push back. Let’s say you think the appraiser got it wrong. You (or the seller, for that matter) can dispute the appraisal — though that may mean it’s you who pays for a second appraisal. You can also find another lender and get a new appraisal, which you’ll need to pay for. A new appraisal might yield a different result, though it comes with additional costs.

If your contract included an appraisal contingency, you may choose to walk away and try your luck with a different house.

If a sale doesn’t go through, who pays the appraisal fee?

The appraisal fee is typically non-refundable, even if the deal falls apart. Since the appraiser provides a service — assessing the home’s value — the cost is paid upfront by the buyer or at the time of service. However, if the cancellation happens before the appraisal is completed, you may be able to negotiate a partial refund.

Some ways to protect yourself include:

• Appraisal Contingencies: If an appraisal comes in lower than expected, a contingency allows you to back out or renegotiate.
• Seller Concessions: In rare cases, sellers may agree to cover the appraisal fee as part of closing negotiations.
• Lender Credits: Some lenders offer credits to offset appraisal costs in certain situations.

Can I get an appraisal waiver?

Yes, in some cases, lenders may waive the appraisal requirement altogether. Appraisal waivers are typically available for:

• Low-risk borrowers with a strong credit profile.
• Homes that have been recently appraised through Fannie Mae or Freddie Mac databases.
• Refinancing situations where the lender has a solid valuation history of the property.

To check if you qualify for an appraisal waiver, ask your lender. If eligible, you can save time and money by skipping the traditional appraisal process.

Factor the appraisal into your home ownership journey

When you’re buying a home, costs can quickly add up. There’s the down payment, of course, and the home inspection. Maybe you’ve also opted to conduct a survey? And we haven’t even talked about moving costs or the startup charges that can accompany getting your utilities up and running.

The home appraisal is one more expense you’ll need to prepare for to achieve your goal of homeownership. Ultimately, the appraisal is a worthwhile investment; you want to make sure you’re getting your money’s worth and paying the fair market value of the property.

An experienced real estate agent can walk you through the process. Get in touch today and connect with a top HomeLight agent.

Header Image Source: (DC Studio / Shutterstock)