Home Buying in Greeley>Question Details

Apearl, Home Buyer in Greeley, CO

If the seller is to pay for the appraisal cost, is it normal for the lender to ask the buyer to pay the appraisal up front and reimbursed later?

Asked by Apearl, Greeley, CO Mon Jan 24, 2011

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Yes it is normal. The Appraisal is for the Lender, and the Lender is working for the buyer.

Colorado law that states the the lender has to have the appraisal paid in full within 30 days, and then add the HVCC laws that say the lender has to use a appriasal managment company of some type. This put the idea of the seller paid appraisal in conflict. If for some reason the deal didn't close, the lender then would have to TRY and get money from the seller (and no chance of that since the contract is dead). And since the seller would then never pay, that leaves the lender on the hook, and again Colorado law states the appraiser has to be paid within 30 days. So because the lender will never want to be on the hook for the fee, they will require it to be paid by the seller, and assuming the deal closes the buyer would get a credit at closing.
2 votes Thank Flag Link Mon Jan 24, 2011
Although Joseph's suggestion may be the best one here, there is another suggestion for you. Due to the RESPA changes that took effect last year, we can't take payment for an appraisal until 3 days after the loan was disclosed. Therefore, we no longer take checks for appraisals, we take either a credit or debit card. We are both bankers and brokers, so if the loan happens to be a brokered loan, many lenders require us to order the appraisal directly through them, and we will use the credit card for that as well because the order is done on-line through their website, which only takes credit cards. If the seller agrees to pay for the appraisal, they can give their credit card. if the deal falls through for some reason, and they find another buyer who needs financing, they can direct them to the same lender, and the lender could just get the borrower's name changed on the appraisal.
Note one thing, even though you, or the seller in this case, pay for the appraisal, it still belongs to the lender. You are entitled to receive a copy of it, however, it does not belong to you.
0 votes Thank Flag Link Wed Jan 26, 2011
In this situation you can ask the lender if the seller can personally pay the appraiser at the time the appaisal. I'm sure this will resolve the matter. Please check state laws to see if this is allowable.
0 votes Thank Flag Link Wed Jan 26, 2011
As long as everyone is on the same page, this should all shake out in the end and you will be credited this amount at closing!!

Just be sure that you see this in your settlement statements.
Web Reference: http://www.brookehengst.com
0 votes Thank Flag Link Wed Jan 26, 2011
There are initial expenses that must be paid...like appraisal and inspection. These individuals are business people who would like to be paid for their services. If you terminate the contract, they will want to be paid...
You have a "credit" at closing for closing costs that will include the appraisal but not the Inspection.
Kimberly Ryan
0 votes Thank Flag Link Tue Jan 25, 2011
Jim is right.
Most lenders want the Appraisal paid for up front. If the deal dies then the Lender needs to pay the Appraiser and with a good amount of deals dieing now this is becoming the Norm.
0 votes Thank Flag Link Tue Jan 25, 2011
Also, just to add to Peter's answer, the seller is allowed to specify a specific amount of closing cost that will be paid from seller's funds but not allowed to set any rule as to what will be paid from seller's funds. Appraisal cost is normally a red flag to an underwriter if the seller volunteers to cover this cost. The underwriter expects the buyer to cover this expense and may suspect the transaction is not at arms length if the sales contract or any document specifically state the seller will pay for the appraisal.

0 votes Thank Flag Link Mon Jan 24, 2011
Yes, this is correct. Even if the seller is paying for your closing costs you will be requested to pay for the appraisal up front. It will come back to you on the HUD (settlement statement) at closing. Good luck!
0 votes Thank Flag Link Mon Jan 24, 2011
From past experience, the lender would ask you for a check in the amount of the appraisal cost and they would keep it in your loan file. If the sales contract fails and you do not close on the home, you would be liable for the appraisal cost. At that point your check would be sent to the appraisal company for payment. If all parties complete the transaction and you close on the home, the appraisal would be paid for out the the sellers proceeds and your check would be returned to you.

I hope that helps! Keep in mind I do not know how your sales contract exactly reads so I am basing my answer on how I would typically write a contract when asking the seller to pay for the buyers closing cost, including the appraisal fee.
0 votes Thank Flag Link Mon Jan 24, 2011
It is normal and customer for the lender to request payment up front for the appraisal even if the seller is paying for it at closing. The appraisal fee is one that the lender has to pay no matter whether or not the loan closes. Therefore, if the transaction were to fail for any reason, it is your responsibility to pay it up-front. If the seller is going to pay for it, you should receive a reimbursement from the seller as part of your final closing statement.

I hope this helps!
0 votes Thank Flag Link Mon Jan 24, 2011
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