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1.4.7 Appraisers

Lenders, or in some cases mortgages brokers, hire an appraiser or appraisal management company to determine the value of the property. Appraisal management companies are essentially brokers for appraisal services. They administer networks of independent appraisers to perform appraisals.

Appraisers are subject to state regulation and professional standards, as provided in the Uniform Standards of Professional Appraisal Practice, which is promulgated nationally by the Appraisal Standards Board. In addition, various federal regulations and statutes establish standards for solicitation, selection, compensation, conflicts of interest, and appraiser independence for mortgage loans.314 Federal regulators have proposed requiring states to adopt rules for appraisal management companies.315 The proposal was still pending at the time this treatise was published.

Borrowers may pay for an appraisal before the closing, or the broker or lender may pay for the appraisal and require the borrower to reimburse the cost of the appraisal from the loan proceeds. In either case, the payment for the appraisal should be listed on the HUD-1 settlement statement or closing disclosure. Obtaining an inflated appraisal is a key element of many mortgage fraud schemes.316


  • 314 {233} See § 6.6, infra; National Consumer Law Center, Truth in Lending § 9.4.2 (9th ed. 2015), updated at

  • 315 {234} 79 Fed. Reg. 19,521 (Apr. 9, 2014).

  • 316 {235} See § 6.6, infra (discussing appraisal fraud).