Appraisal fee – definition and meaning

An appraisal fee is a payment made to someone to evaluate how much a home is worth. It is essentially a fee to estimate the value of a property.

As an independent assessment of a property’s value, an appraisal is important for lenders to know how much a home is actually worth.

If you pay more for a home than its real market value, it takes longer to build equity in the home.

According to BusinessDictionary.com, an appraisal fee refers to:

“Charges payable to a qualified appraiser for estimating the market value of a property, as a fixed fee or one based on a percentage of the estimated value.”


AppraisalThe lender (bank) orders and arranges for the appraisal. (Image: theappraisalgroup.org)


Before the appraisal process, home sellers could sell their property at any price, based on their own assessment of what they thought the property was worth. Home owners would try to maximize their profits by selling their house for the highest possible price.

However, as foreclosures increased and the number of homeowners defaulting skyrocketed, the appraisal process became a key component in the home-financing process. It helps protect the interest of banks and home buyers.

Banks won’t lend without an appraisal

Mortgage lenders the world over will only consider offering a loan to buy a home after an appraisal is carried out. This is because the property is the underlying asset that serves as collateral (security) for the money lent.

If the borrower runs into financial problems and loses his or her home to foreclosure, the lender will have to sell the property in order to repay all or some of the loan.



Appraisals help buyers too

Appraisals can function as a consumer protection for buyers. If the appraisal estimates the house’s value higher than the price you are paying, you will benefit immediately, because you will have more home equity than you had expected.

However, if it comes in lower, you and the seller must abide by the contract that was negotiated, unless it was contingent on an appraisal, in which case you may withdraw the offer.

According to realtor.com, a typical appraisal fee in the United States will cost between $300 and $400.

Video – What is an Appraisal?

An expert with thirty years of real estate experience answers common questions asked by home buyers regarding appraisals.