Fair cost for appraisal

Buying & Selling Real Estate
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Fair cost for appraisal

Robert Leitner
Member since 2020 · 49 posts · 12 votes

Hi all, I was buying an investment property in Phoenix, which I backed out of today after learning of HOA restrictions. I contacted my broker and asked him to hold the appraisal, unfortunately found out today that I missed stopping it. My RE agent was confused because she said it was never scheduled, the broker told me it was a table top appraisal so it didn't need to be scheduled because they don't go in the property. I've never had a table top appraisal on any of my properties and I'm a little frustrated that I'm paying full appraisal price for something less than that. Not that it matters anymore because I backed out for other reasons, but the appraisal came in $58k, or 19% under selling price. It's a crazy market and I expected it might come in under, but comps even support something within 10% of the selling price. My questions regarding the appraisal-

  1. 1. It was $585, does that seem high for a table top appraisal? (for Phoenix if it matters)
  2. 2. Do they have to disclose that they’re doing a table top beforehand?
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Brad S.
Investor · Pasadena, CA · Member since 2017 · 613 posts · 523 votes
5y

@Robert Leitner

$585 does sound somewhat higher than average for a desktop report. But, understand that it is most likely an AMC (appraisal management company) which has been contracted to do the appraisal, and not the appraiser directly. So, the Appraiser's fee is probably significantly less.

As to the 2nd question- I’m not sure who you are referring to as “they,” but FYI, You (the Borrower) are not the Appraiser’s client, the Lender is. In this case, the appraisal is for the lender to make a lending decision, not for the Borrower to get an estimated value. So, no, they do not need to disclose to you that it is a desktop assignment.

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  • Bob Okenwa
    Real Estate Agent/Investor · Peoria, AZ · Member since 2016 · 2k+ posts · 2k+ votes
    5y

    Not sure which company you're using, but I would never pay full-appraisal prices for a desktop appraisal. Point is that DA's (in my own real world experiences) are typically lower than full appraisals and clearly cannot account for factors other than hard data (bed/bath/square footage/lot size). They don't account for view or interior finishes. It should have cost around $150-$250.

    I think it would be good business to disclose the type of appraisal they'd be doing before stealing your money and giving you a crappy desktop appraisal.

    2Reply
  • Lori Fentem
    Member since 2021 · 17 posts · 10 votes
    5y

    Was this for a SFH or MF? All my experience is with SF and the appraisers are in high demand right now and lots of issues with best practices and timing. I have paid more for appraisals but only for large custom SFH. I agree that this price sounds high for desktop and that it "should" be disclosed up front.

    1Reply
  • Brad S.
    Investor · Pasadena, CA · Member since 2017 · 613 posts · 523 votes
    5y

    @Robert Leitner

    $585 does sound somewhat higher than average for a desktop report. But, understand that it is most likely an AMC (appraisal management company) which has been contracted to do the appraisal, and not the appraiser directly. So, the Appraiser's fee is probably significantly less.

    As to the 2nd question- I’m not sure who you are referring to as “they,” but FYI, You (the Borrower) are not the Appraiser’s client, the Lender is. In this case, the appraisal is for the lender to make a lending decision, not for the Borrower to get an estimated value. So, no, they do not need to disclose to you that it is a desktop assignment.

    2Reply
  • Brad S.
    Investor · Pasadena, CA · Member since 2017 · 613 posts · 523 votes
    5y

    @Brad Sand

    By the way, I was assuming there was a Lender and loan involved, otherwise, You would be the client, and would’ve ordered the appraisal, or maybe your broker/agent would do it on your behalf. So, you (the client) would’ve ordered it as a desktop.

    1Reply
  • Robert Leitner
    OP
    Member since 2020 · 49 posts · 12 votes
    5y

    @Bob Okenwa, we share the same sentiment, thanks for the reply

    @Lori Fentem, It's for a condo, single unit. I'm hearing demand for houses is high but inventory is low, would have thought fewer sales would result it appraisers sitting around - just my perception. Thanks for the reply. 

    @Brad S., it's the same price I paid for a standard appraisal which is why I questioned it. You are correct, this is through a broker and it's for the loan company, but I had to approve it. They didn't stated desktop upfront, I didn't ask because I didn't know to ask, and when the appraisal came in significantly low I asked why. I will ask, or only approve based on it being a normal appraisal in the future since I'm paying for it. Thanks for the reply. 

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  • Joe SplitrockPro Member
    Moderator
    Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
    5y

    @Robert Leitner I just had two full appraisals done, where the appraiser enters the property, measures, takes pictures, etc. One cost $600 with tax and the other was $550 with tax. Two years ago, I had an appraisal that was $700. You can see a decent variance all in the same local market. 

    Earlier in the pandemic, I had a couple refinances done and they did a "drive by appraisal", which is what you are describing. They were around $400, so definitely less expensive because the appraiser does less work. 

    You may just be stuck paying for it, but I would question the charges. Ask to see a receipt. Ask what their full appraisal rate is if they enter the property. Make sure your lender isn't marking it up. 

    1Reply
  • Robert Leitner
    OP
    Member since 2020 · 49 posts · 12 votes
    5y

    Thanks @Joe Splitrock, good suggestions

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  • Robert Leitner
    OP
    Member since 2020 · 49 posts · 12 votes
    5y

    When questioning it, my broker mentioned that investment properties are usually more. Seems the work is the same regardless of the reason someone is buying the property, is this legit? 

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  • Joe SplitrockPro Member
    Moderator
    Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
    5y
    Originally posted by @Robert Leitner:

    When questioning it, my broker mentioned that investment properties are usually more. Seems the work is the same regardless of the reason someone is buying the property, is this legit? 

     An investment appraisal will also have a rent comparison for income based valuation. In my appraisals, it is one page with three rent comps, probably just pulled from Zillow. Not a ton of extra work, but a good excuse to soak an investor for a couple extra bucks.

    0Reply
  • Alan Lacey
    Lender · Grand Rapids, MI · Member since 2019 · 175 posts · 82 votes
    5y

    @Robert Leitner given rental property appraisal with operating income statement t and 2016 which is standard for conventional mortgages are running 750 to 80 in your market I would say that you are paying less already.

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  • Robert Leitner
    OP
    Member since 2020 · 49 posts · 12 votes
    5y

    @Alan Lacey, thanks for the response. I'm not getting an appraisal with an operating income statement. I've also had three prior appraisals in last year, 2 of which were from the same company and were the same price, but they were full appraisals.

    0Reply
  • Caroline Gerardo
    Lender · Washington DC · Member since 2015 · 2k+ posts · 2k+ votes
    5y

    The lender had the AMC send you a link to enter your credit card NONRefundable before they assigned it to a real person. You e-signed or wet signed contracts to be responsible for hard costs with the lender. Phoenix market is hot, the lender maybe asked for a rush (rush fee $200) range cost for single family appraisal with rent surveys is $495-1000. If the appraisal was only an AVM (automated) then no real person is assigned. I run AVM's on my computer for zero - $50 range. A condo would likely be free if there are recent sales. Does the appraisal have photographs? I guess yes, therefore appraiser took them curbside. When you bid the condo higher than everyone, you knew the appraisal was going to be low, you say this in your question. This is the reality of the wild west market we are in. Your agent could have, should have said: The last two units in this HOA sold for x in 2020. Condos don't accelerate as fast as single family. In my humble opinion you are not due a refund.

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  • Caroline Gerardo
    Lender · Washington DC · Member since 2015 · 2k+ posts · 2k+ votes
    5y

    Two more things for investors to know: Calling the agent to stop the appraisal was wrong move. You should have asked your mortgage banker to conference call the RAC or Appraisal management corp. Say it's Nationwide or LVS you get them on the phone to stop the work, if in progress you might have gotten some refund. The RAC then calls the local appraiser or emails to stop.    When you get the link to give your credit card to the RAC they tell you borrower the cost in the email. If the cost increases they email you borrower again. Your buyer's agent probably had no idea who the RAC was when you called. We provide a website for each transaction for borrower, agents, title, RAC, all the 200 services who work on your loan. This makes it transparent.  As a mortgage banker I don't know who the end appraiser is until the work is completed, but agents and buyer does. This is structured with layers of removal because of Dodd Frank to keep the lender player from telling the appraiser to do anything. Blame Barney Frank.

    1Reply
  • Patrick Britton
    Ann Arbor, MI · Member since 2014 · 1k+ posts · 997 votes
    5y

    Fees for appraisal services are all about supply and demand.

    A lender will order an appraiser through an AMC. The AMC will blast out the required turn time and fee to a whole slew of qualified appraisers (most appraisers cannot do VA, FHA or larger MFR, etc.). Appraisers bid on the job and eventually someone will be chosen.

    Since the market is insane and there are so few appraisers, prices/fees skyrocket. This is good ole’ fashioned free market capitalism at work.

    Appraisal waivers seem to offer a modest solution to a massive problem. My suggestion?  Contact your congressperson and demand a total and complete overhaul of the appraiser industry.  There’s no reason why a highly experienced realtor should NOT be allowed to do appraisals. 

    1Reply
  • Robert Leitner
    OP
    Member since 2020 · 49 posts · 12 votes
    5y

    @Caroline Gerardo, thank you for the reply. The lender didn't send me a link, in this case the broker ordered the appraisal and paid for it, then planned to recoup the cost at closing. I don't believe it was rushed, if it was then I wasn't told or asked, only knew that the cost was $585 because of closing estimates. I didn't see pictures, but asked my broker and am waiting to hear back. He did mention that if I had intended on moving forward he would have asked for an appraisal reconsideration. I actually didn't bid higher than everyone, but did have the strongest offer, which did include a clause that I would only pay $10k over appraised value. But that's besides the point, and you're right it is a hot market, but it has been for a while and there are comps to support something considerably higher that the $312k that this unit was appraised. I expected that it might not make $370k, which is what I offered and only $5k higher than asking, but there was plenty to easily justify $350k not taking into account that it was fully remodeled. At least one lesson learned in this is to not let the broker pay, and if possible, request that it's not table top. 

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  • Robert Leitner
    OP
    Member since 2020 · 49 posts · 12 votes
    5y

    @Patrick Britton, thanks for the response. My assumption, clearly wrong, was that the low supply of houses means low amount of selling, leading to appraisers sitting around. Either way, this was the fourth house I was buying in the last year, using the same broker, agent, and in 2 of the 3 other cases the same appraisal company. The prices was the same, the market wasn't that much different, so I expected the same level of appraisal - or to be told / given the option up front. Maybe, my broker knew and failed to mention for whatever reason. He's served me well so I'll give him the benefit of the doubt and take it as a lesson learned. 

    0Reply
  • Caroline Gerardo
    Lender · Washington DC · Member since 2015 · 2k+ posts · 2k+ votes
    5y

    @Patrick Britton Many long time agents cannot do a BPO with accuracy. As digital records are being compiled by our government with Corelogic, Uniform Collateral Data Portal® (UCDP®) members, and others all the tract houses in America have information available. This might not include upgrades, remodels, additions, bootlegs, solar, view, condition and more but the information is enough on lots of residential real estate. Appraisal careers are shifting, like my job. Average age of appraiser is 61. This once was a calling where an appraiser had son or daughter taping a house to learn the trade, not so much today. The job is laborious - climbing around, measuring, taking photos of comps where a lady comes out with a gun; but also numbers, stats, knowing all the houses in a city from previewing or prior work @Robert Leitner you are kind not to blame your broker, and a real AVM desktop should nearly have been cheap digital information. Now that markets jumped, like the wild west out here, the need for a live appraiser with knowledge, analytical tools, and courage is more important to be the eyes of the Underwriter who worries about her job.

    0Reply
  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    5y

    Price seems perfectly reasonable to me for a major metro area.

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