How are Appraisal Fees Determined?

 

It goes without saying that appraisers and their services are valuable, and we couldn’t agree with that statement more. As licensed, trained professionals, lenders and property owners alike rely on appraisers to give the best and fairest appraisal they can. However a lot of factors go into determining how costly an appraisal might be, and with the appraiser pool shrinking, things like property complexity, turnaround time, scheduling, supply/demand, and even a lack of information all play into an appraisal cost, and more specifically, an appraiser’s fee. With laws regulating customary and reasonable fees for geographic markets, how do you know how appraisal fees are determined?

There are two ways that we determine the fee for an appraisal at MountainSeed. The first has to do with commercial properties.

COMMERCIAL PROPERTIES

For commercial properties, we bid the assignment out to at least three appraisers on our client’s panel that serve the given geography and property type. Bidding is a great way to determine the best fit for the appraisal. Once the bids are received, we transmit those to our clients who then select the winning bidder. It is important to choose not just the lowest bid, but the “best” bid. Sometimes this includes prior service on the property, or sometimes it can be based on MountainSeed’s proprietary scorecard system. Although we have a similar process for residential appraisals, we mix it up just a little.

RESIDENTIAL PROPERTIES

Residential appraisals are assigned to appraisers based on their stated “rate card.”

• Pro Tip: Some AMCs dictate fees to appraisers. We believe this is a dangerous practice, and at MountainSeed, we don’t dictate fees to appraisers. In fact, unlike most AMCs, we don’t pay the appraiser, and instead the bank or credit union does. By paying the appraiser directly, the bank knows exactly where the fees are going (and it’s not to us).

Since we use a bidding process for our commercial appraisals (and we recommend you do, too), we find that appraisal fees can vary vastly. You might pay more for not giving your appraiser enough time to complete the appraisal, not giving you appraiser all information up front, and scheduling appraisals to be due around holidays. All of these will cause fees to increase. Consider too how specific the property is. Home appraisal costs might vary greatly from a golf course appraisal cost. In essence, the complexity of the property matters – a lot. Supply and demand also plays a big factor in appraisal fees. There are areas around the country that lack the sufficient amount of appraisers to serve a given area’s loan volume. As such, these areas can demand higher fees. That coupled with the fact that the real estate appraisal field is top-heavy with people a lot closer to retirement than what is ideal, means there are fewer appraisers to go around.

IF YOU DON’T READ ANYTHING ELSE

Expect the unexpected and be prepared for unforeseen fees from the get-go. Avoid high appraisal fees by allowing enough time for the appraiser to do his job by giving him all of the information right away. If you don’t give the appraiser the right information, they could inspect the property and find the assignment to be more difficult than they originally thought. Additionally, using things like our Benchmark report which gives you real, actionable data on appraisals are going for in a specific area or region to help you determine fees upfront.

Have more questions about appraisal fees? We’re happy to chat more.