Who Owns the Appraisal Report & Who Pays the Cost?

Understanding the complexities of home appraisals is essential for anyone involved in real estate transactions. This article explores who is responsible for paying for these appraisals, who owns the resulting reports, and the regulations outlined by the Canadian Uniform Standards of Professional Appraisal Practice (CUSPAP) as enforced by the Appraisal Institute of Canada (AIC).

Who pays for the house appraisal?

In most financing and refinancing scenarios, the buyer, borrower, or homeowner is responsible for covering the appraisal fee. This fee is often required upfront or may be paid indirectly through Appraisal Management Companies (AMCs). The cost of an appraisal can vary significantly, ranging from a few hundred to several thousand dollars, depending on the property's complexity and location.

However, despite bearing the cost, the buyer or homeowner can sometimes not own the appraisal report, especially in financing or refinancing contexts.

Ownership of Appraisal Reports

Scenarios for Real Estate Appraisals

• Mortgage Financing and Refinancing with a Lender: In these cases, the lender orders the appraisal to confirm that the property's value supports the loan amount. The lender owns the report, even though the borrower pays for it.
• Appraisal Requested by Mortgage Broker for Private Lenders: Mortgage brokers often arrange appraisals for private lenders. The broker commissions the appraisal, but the private lender owns the report. Occasionally, a draft report is sent to the broker until the lender is identified, after which the final report is sent directly to the lender.
• Matrimonial Separation Appraisal: During a matrimonial separation, either spouse—or both—may request an appraisal to determine the property's value for asset division. The requesting party typically pays for the appraisal, and its distribution depends on the Letter of Engagement between the appraiser and the involved parties.
• Appraisal Ordered by Executor of Probate Property: Executors often require appraisals to determine the fair market value of a deceased person's property for probate. The estate typically covers the cost, and the executor or authorized user receives the report.
• Homeowner Requesting an Appraisal for Capital Gains Tax Reporting/Planning: Homeowners may request appraisals to determine the fair market value of their property for capital gains tax reporting or planning. The homeowner will receive the report, and it is their option to share it with their accounting professional or tax authorities as needed.

Conclusion

Understanding the ownership, payment responsibilities, and regulatory standards of real estate appraisals is essential for all parties involved in property transactions. The Appraisal Institute of Canada (AIC) mandates that all members adhere to the Canadian Uniform Standards of Professional Appraisal Practice (CUSPAP), ensuring that appraisals are conducted with the highest standards of professionalism and ethics. This provides valuable insights for homeowners, buyers, sellers, legal professionals, financial advisors, estate executors, trustees, and lenders alike.

Feel free to contact an AIC Designated Appraiser for a free consultation on the residential appraisal process.