Financing in 92131>Question Details

The Coach, Both Buyer and Seller in La Jolla, CA

Cost of appraisal for a new home.

Asked by The Coach, La Jolla, CA Wed Jun 6, 2012

We are purchasing a new home. The cost is $919K. I received some loan docs from the builder's 'inhouse' lender, TBI. Some of the costs surprised me :
$650 for an appraisal fee .... I don't think I ever paid more than $300.
$2450 for lender's title insurance. Isn't that a bit high, and why am I paying for the lender's insurance anyway? Should I negotiate these down?

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Deborah Garvin’s answer
Good answers. For the record, I haven't see a $300 appraisal in years!

I think the subject of the title insurance is pretty well addressed already. However, the charge for the appraisal MAY be including a final inspection, since your are buying new construction.

One thing to note: No lender can charge you more for third party services (credit, appraisal, title, escrow, etc.) than the ACTUAL fees. If your credit report costs my company $14.95, at the end of the day that is EXACTLY what you will pay.

Best to you!
0 votes Thank Flag Link Fri Jun 8, 2012
Maybe you're right about the fee for appraisal for a new mortgage. We've been in the same house for 14 years, and refinanced about 4 times over the past 5 years...we usually pay about $250 for our 'refinance' appraisals
Flag Fri Jun 8, 2012
My experience in San Diego is that appraisals are up to $500. I think you should definitely inquire about the fee and tell them what the normative fee is.

Title fees are high and your lender requires them. There is little you can do about that. The good news is that you are able to purchase a fabulous new home...the bad news is that are some costs that are just part of the package.
0 votes Thank Flag Link Thu Jun 7, 2012
You are paying for the lender’s title insurance because the home is collateral for your loan and the lender insists that the collateral be protected at the borrower’s expense. This is standard and not negotiable. It is like saying “why should I pay for an appraisal when the appraisal is mostly to determine the value of the collateral upon which the lender basis the loan amount?”
0 votes Thank Flag Link Thu Jun 7, 2012
Hi Coach,
Your agent should be advising and assisting you. I hope you have one as it is to your detriment not to. The lender's title insurance is based on your loan amount and the rate is filed with the department of insurance, so it is unlikely that you will be able to negotiate it down with the title company. You need to make sure what costs you are responsible for per the contract as each builder is different. If I didn't mention it before, you NEED to be working with an agent to represent you and look over your shoulder to protect you. $650 is typical for appraisals as there are sometimes two done and/or a desk review.

Sinead McAllister
McAllister Homes Real Estate
0 votes Thank Flag Link Thu Jun 7, 2012
Often, the fee are portortional to the value of the property;
they know they can charge more.
The Appraisal can be more if the house, property and outbuildings are larger.
In Fresno, we are seeing $450 for appraisals, so you are not out of the ballpark.
Normally, in California, the Buyer pays the Lender's Title Policy and 1/2 of the Escrow.
You should ask the Escrow Officer at your Title Company for a copy of your HUD1, which deliniates all the charges for the Buyer and the Seller. It will answer some questions.

Good luck and may God bless
0 votes Thank Flag Link Thu Jun 7, 2012
Bank usually charge $400 to $700 for the appraisal. They do not pay the appraiser this much for the appraisal, trust me. They will send the order to a management company. The management company will hire the appraiser. The management company will bid as low as $200 for the appraiser to appraise the home and the banks and management companies will keep the profit. The appraiser will bid on the order just like when you shop for landscaping and you get three bids. Many times the management companies will select the lowest bidder, but it just depends on turn time and experience in some cases.
0 votes Thank Flag Link Thu Jun 7, 2012
I agree with the other comments below and have a few additional comments for you.

On higher value properties, it is not uncommon for a desk review of the appraisal to be required by the lender. A desk review is essentially a cursory audit of the primary appraiser's valuation. Perhaps the initial appraisal is around $500 with a desk review of $150. The lender could be lumped together on your Good Faith Estimate.

In most transactions, the seller pays for the Owner's Title Policy. Since you specifically mentioned the "Lender's Insurance", we are talking about an additional title policy to protect the lender.

The owner's policy protects you should there be a title issue jeopardizing your ownership of the property. You will receive a Grant Deed when purchasing the property. The owner's policy insures that deed.

When a property is subject to a mortgage, a Deed of Trust is recorded at the same time as your Grant Deed. The Lender's Policy of Title Insurance protects the mortgage holder and insures the Deed of Trust securing the mortgage holder's collateral interest in the property.

If the purchase was made with no financing, there would not be a lender's policy.

I hope that helps a bit.
0 votes Thank Flag Link Wed Jun 6, 2012

As for the appraisal, the HVCC appraisers we talk to consistently comment about being underpaid. I have not been able to find any conclusive data, but you can call HVCC and see what they will tell you.

Title insurance is calculated by the amount of your loan. There are online calculators, with a $730,000 loan the insurance will be $2,300. So the number is not out of line. On many new homes, the Title Insurance is on the buyer's side. It is in the contract. Most people negotiate extras from the builder to offset the additional costs.

Hope this helps,

Mark & Kari Shea
Shea Real Estate
Home Sales Specialists; New and Resale Homes
Property Valuation Specialists
Land Sales, Acquisitions & Consulting
Serving Greater San Diego
0 votes Thank Flag Link Wed Jun 6, 2012
The Coach,

I don't know all of the details, but the fees do not sound extraordinarily out of line to me. As for the appraisal fee, you can thank the Home Valuation Code of Conduct (HVCC) for the increase. Most appraisals for the last several years have required an appraisal management company (AMC) to facilitate the processing. This has added a layer of bureaucracy and cost and it is paid by the consumer.

If you would like a side-by-side on the transaction, just e-mail me and I'll be happy to provide an estimate of what we would charge. I realize you are probably inclined to use the builder's resource, but if it puts your mind at ease, I'm happy to do it.

Rob Spinosa
0 votes Thank Flag Link Wed Jun 6, 2012
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