Even though prospective homeowners usually pay for their home appraisal, many remain unaware that they typically won’t receive a copy of it.
That’s because the professional appraiser sent to calculate the value of a home—which can cost anywhere from a few hundred to several thousand dollars—doesn’t actually work for the prospective homeowner.
“Most brokers know the golden rule in lending is ‘he or she who holds the gold, makes the rules,’” explains Christopher Bisson, founder of appraisal tech company Value Connect. In other words: whichever party is responsible for commissioning the six- (or, in some markets, seven-) figure loan to fund a mortgage gets to call the shots. That includes who pays for the appraisal.
This can seem like a strange system to homeowners, especially when compared to similar financial processes in other parts of their lives. Financial institutions are required to provide copies of credit score assessments to clients, for example, even if a third party requests it. This is to ensure everyone is on the same page in regards to someone’s creditworthiness.
Who owns the appraisal?
According to the Appraisal Institute of Canada, which represents most of the profession, an appraisal report belongs to whoever it is commissioned for. That’s the lender, when it’s done for financing purposes.
“A homeowner, even though they’re paying for it, is not the appraiser’s client,” says Keith Lancastle, interim CEO at the Appraisal Institute of Canada. “The appraiser has an obligation, first and foremost, to their clients not to provide copies of the report to anyone other than the client who has contracted with the appraiser to prepare it.”
In fact, according to the AIC’s website, the question of who gets a copy of the appraisal report is a business decision by the lender or mortgage broker retained by the homeowner. It goes on to say an AIC member “would not be aware” of whether the homeowner paid for the report, or whether the homeowner would even get a copy of the report regardless of the loan application’s outcome.
The Canadian National Association of Real Estate Appraisers (CNAREA) takes a similar position when it comes to the ownership of appraisals.
“CNAREA adheres to the Uniform Standards of Professional Appraisal Practice (USPAP). Under USPAP, the report is the property of the client, which in the mortgage financing industry is not always the party that pays for the appraisal,” CEO Stacy Thomson told CMT.
“The client has the ability to provide the report to other parties, so long as confidential or licensed data is not in jeopardy,” she added.
Bisson says the reason for having such strict guidelines over who gets an appraisal report is to ensure lenders get the information they need out of it. A triple-A bank, for example, might have different lending criteria compared to a private lender, so an appraisal prepared for one may not be terribly suitable for another.
“From an appraiser’s point of view, you do not want to have an appraisal report floating out there for everybody to rely on,” Bisson says. “It may seem counterintuitive, but they want to know who the report is going to.”
Regardless of which professional association an appraiser belongs to, they can still choose to release the results of an appraisal with their client’s permission. But Bisson says that doesn’t happen very often. However, clients may be able to get their hands on an appraisal report in its early stages. Bisson knows some mortgage representatives who are sent draft copies and make them available to borrowers.
He recommends this strategy if it isn’t clear which lender will handle a mortgage application: tell the appraiser what “type” of lender the report will likely go to. Appraisers will build the report with criteria those lenders typically request, so it won’t deliver any of the surprises that can often happen when going from a AAA lender to a B (or Private) lender.
Meanwhile, Lancastle says, lenders may be reluctant to release appraisal reporters to keep a competitive edge. “I certainly can’t speak to the motivation that a lender has for not wanting to turn it over,” Lancastle says. “But one can assume that if I’m a lender, I don’t want someone to have a copy of the appraisal report and then be in a position to go and, essentially, look for alternatives.”
The practice of having a homeowner pay for an appraisal, he adds, is also one that’s just become a standard of the mortgage industry. “That appraisal fee is one of a number of features that a borrower makes,” Lancastle explains. “That’s the business model that the lending community has established in the marketplace.
Correction: An earlier version of this story initially contained incorrect information pertaining to the position of The Canadian National Association of Real Estate Appraisers on the ownership of appraisals.