Legal Q&A: List existing appraisal fee on the GFE?

Q.  Under RESPA (Real Estate Settlement Procedures Act), should a lender list a charge for appraisal on the Good Faith Estimate (GFE) if the firm is using a prior appraisal that will not be charged to the borrower?

A. No.  When lenders use services they obtained in prior transactions, the loan originator should not include a charge for the appraisal on the GFE.

A loan originator may know at the time of application that he will use an existing appraisal for a property. Under such circumstances, it is not reasonable or accurate to estimate on the GFE that the buyer will incur a charge for the appraisal.

In some situations, a loan originator will use a previously prepared appraisal after the GFE has been issued. Even though the originator has estimated that the buyer will incur a cost for the appraisal, those costs should not be included on page 2 of the HUD-1/1A or in the comparison chart on page 3 of the HUD-1/1A.

The U.S. Department of Housing and Urban Development (HUD) has indicated it is not appropriate for such fees to be included on the settlement sheet in these circumstances because it does not provide an accurate representation of the transaction.

Expect that lenders will want to include this charge on the comparison chart, though, if for no other reason than to demonstrate to the borrower that it “saved” the consumer money. Remember — the purpose of the GFE is to provide accurate, advance disclosures to borrowers about what fees they can anticipate incurring at or before the time of settlement.

RESPA is an organic piece of legislation and things continue to evolve as the industry adjusts to the most recent spate of amendments. Realtors® with questions about RESPA should contact the PAR Legal Hotline or experienced real estate counsel when questions arise.