The lender I work for specializes in Agricultural Lending and Rural Home Lending. The collateral we take is commonly agricultural land, properties in remote locations, or rural homes that have large amounts of acreage. When we talk with our customers, we try to be very thorough in understanding what the collateral will be. We ask questions about water rights, amount of acreage, whether it’s considered agricultural, whether it’s waterfront and what types of out buildings it may have, etc.

When quoting fees on the Loan Estimate, we use historical data that we’ve compiled depending on the county and previous appraisal fees for that type of collateral. Because our collateral is fairly unique compared to most conventional lending, getting bids from an appraiser can take far longer than three days, so waiting for an actual bid would put us out of compliance. It isn’t uncommon for our appraisal costs to run between $700-6000.

There are occasions we receive a bid after providing an LE that has a much higher fee for the appraisal. In situations where we haven’t learned any new information about the property, but the appraiser deems it to be more complex due to extensive research needed to find comparable properties, or the bid is higher due to the distance of the property from the nearest MSA, is it permissible to call the customer and communicate that bid has come in much higher and ask them if they would like to proceed, allowing for the increased cost to be passed to the customer?

is it permissible to call the customer and communicate that bid has come in much higher and ask them if they would like to proceed, allowing for the increased cost to be passed to the customer?

No - you either have a valid changed circumstance or you do not.

Thank you Randy!

I was hoping you might have an out with the following but since the fee change is not based on inaccurate information provided by the applicant, and it sounds like you all do your due diligence with the customer for the property type, it would be a very far stretch to rely on it.

i. Charges subject to the zero percent tolerance category. Assume a creditor provides a $200 estimated appraisal fee pursuant to § 1026.19(e)(1)(i), which will be paid to an affiliated appraiser and therefore may not increase for purposes of determining good faith under § 1026.19(e)(3)(i), except as provided in § 1026.19(e)(3)(iv). The estimate was based on information provided by the consumer at application, which included information indicating that the subject property was a single-family dwelling. Upon arrival at the subject property, the appraiser discovers that the property is actually a single-family dwelling located on a farm. A different schedule of appraisal fees applies to residences located on farms. A changed circumstance has occurred (i.e., information provided by the consumer is found to be inaccurate after the disclosures required under § 1026.19(e)(1)(i) were provided), which caused an increase in the cost of the appraisal. Therefore, if the creditor issues revised disclosures with the corrected appraisal fee, the actual appraisal fee of $400 paid at the real estate closing by the consumer will be compared to the revised appraisal fee of $400 to determine if the actual fee has increased above the estimated fee. However, if the creditor failed to provide revised disclosures, then the actual appraisal fee of $400 must be compared to the originally disclosed estimated appraisal fee of $200.