Refinancing debt on your home is a great way to ensure you’re getting the best deals from lenders, but securing a second loan midway through the term of a first isn’t always so easy.
One of the obstacles you’ll face is a second appraisal of your property. They can be time-consuming, anxiety-inducing, and of course expensive. So, who can you expect to foot the bill?
As there are mostly only ever two parties involved in a loan agreement, lender and borrower, it’s one of the two, and I’m sorry to report that it is in fact, you, the borrower, that has to fork out for the appraisal.
The reason that you have to pay for an appraisal is that it’s not the lender themselves doing the assessment. In fact, beyond the odd, very basic back and forth, lenders and appraisers aren’t even allowed to communicate.
The only way to ensure an unbiased report is for you to book the assessment via a 3rd-party company.
Breaking the rules on lender/appraiser relations can amount to severe disciplinary action, so naturally, the lender wants to be as detached from the situation as possible, but their reluctance to chip in also stems from uncertainty.
At this point in the application process, it’s unknown whether you’ll be using their services, meaning they’d be paying out for something that could potentially bring zero profit.
Is it fair? No, not really. After all, you’re the one that needs money, and they’re the ones that have plenty of it, but that’s just the way the financial world works, unfortunately.
What Are Refinance Appraisals And Why Do They Matter?
Refinance appraisals are by and large the same thing as initial appraisals. The Lenders send in a financial property expert to assess the value of your home.
The expert then reports their findings back to the lender, so the lender won’t accidentally loan more than the property is worth.
The reason a lender can’t offer you more than your property is worth is that if you were unable to keep up with repayments, they couldn’t reclaim their full investment by seizing and selling the house.
But it’s not an entirely selfish endeavor. Lenders also have to be mindful of the borrower and what they’ll realistically be able to pay back.
If they didn’t take precautions, many borrowers would get in over their heads, and end up worse off financially than they were before the loan.
It’s unfortunate that lenders can’t just rely on the previous appraisal, but as the housing market fluctuates wildly over relatively short periods of time, the only way to get an accurate valuation is to book a second appraisal.
What Does A Refinance Appraisal Entail?
The most important part of an appraisal is the home visit. Usually taking between 30 and 60 minutes, an expert appraiser shows up at your doorstep, then proceeds to evaluate your property in and out using a highly refined checking system.
They will be taking notes on the dimensions of your property, checking the amenities to see if everything’s working as it should be, and ultimately, trying to assess the condition of your home as a whole.
They will also bring a camera, in order to snap a picture of every room, the exterior of our house, and any discrete additions such as a garage.
After the home visit, an assessment of transaction histories for similar houses in your area will be carried out. Once all the data has been combined, they will report back to the lender with the approximate value of your property.
The lender can then refer to that figure, along with your assets, income, and credit history, as a guide on whether to loan you the requested sum.
How Much Does An Appraisal For Refinance Cost?
Appraisal fees fluctuate not only from state to state, but from area to area. They are bound by law to charge only what is reasonable in terms of a property’s location, size, and complexity.
Generally speaking, you should be preparing yourself for a $300–$600 fee for the appraisal of a normal, single-family home. The larger the property, the longer the assessment takes, and every minute on the clock bumps the price up a little — it’s like a cab ride.
If your home does not qualify for the desired loan amount, you cannot claim any money back for the appraisal, as the appraiser has done their job, and they still need to be paid.
To make matters worse, recent changes to regulations mean that you aren’t allowed to ask an appraiser for a ballpark estimate before booking their services. You’re either in on the gamble or you can kiss that loan goodbye.
What you can do is carry out some of your own research before booking an appraisal. Do what they do and check out how much similar houses in your neighborhood have sold for recently.
The chances are that your home will go for roughly the same amount, giving you an idea of how the appraisal will pan out.
Alternatively, you could request a real estate agent to use their professional insight to do a spot of research on your behalf, as they’ll have access to more complete and accurate information about the property market.
Do remember to be polite, though, as it’s not a chargeable request, so they’ll be doing you a big favor.
Do You Need to Schedule An Appraisal In Order To Secure Refinance?
A second appraisal is not always required by law, so there are certain lenders and loan agreements that don’t require one before approving a refinancing application.
The FHA, VA, and USDA, for instance, offer Streamline refinance, which is to say, they reuse all the paperwork from your original loan application, but you’ll only be eligible if one of these institutions also provided your first loan.
It’s also important to keep in mind that the Streamline format only offers term and interest rate refinancing. The only avenue to cold, hard cash is a second appraisal.
So, who pays for an appraisal during a refinance loan application? You do. As the borrower, you assume all responsibility for organizing and funding the appraisal, and unfortunately, you cannot claim money back should it go poorly.
To ensure the assessment goes as well as possible, create a clean and tidy environment for the appraiser to assess, making sure to eliminate bad odors. Keep pets out of the way, reduce clutter, and generally try to make their job easier.