Can you be charged for an appraisal if a loan is denied for purposes not related to the appraisal?

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Can you be charged for an appraisal if a loan is denied for purposes not related to the appraisal?

My daughter applied for a loan refinance. The loan agent indicated that she was approved for the loan dependent on the appraisal. The appraisal came in lower than expected but not to the point the loan could not be processed. After this fact the loan officer started making issue with student loans that are currently in deferral. My daughter did everything they asked and they stopped communicating with her. Then 3 months later she got a letter in the mail saying the loan was denied and they want $450 for the appraisal. It seems to me that they should eat this cost as it wasn’t the appraisal that caused them to deny the loan it was something they should have determined before the appraisal was done. Is there a way to fight paying for the appraisal? I realize the loan officer will have to eat the cost but it was his error.

Asked on April 20, 2012 under Real Estate Law, Missouri

Answers:

FreeAdvice Contributing Attorney / FreeAdvice Contributing Attorney

Answered 9 years ago | Contributor

Yes, an applicant can be charged for the appraisal fee for a unit desired to be purchased as part of the loan process even though the loan is denied for reasons other than what the appraised value for the unit came back at. Most importantly the borrower is obligated to pay the appraisal for his or her services with respect to the appraisal.

The reason is that the appraisal is part of the loan process and the appraiser is separate and apart from the lender. The appraiser performs a service as part of the loan and he or she should be paid for the work done regardless if the loan is approved or not.


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