Why are appraisals so expensive?

"Back in the day, I could order an appraisal for $350." So began a conversation with a couple other "old-timers" in the mortgage industry about the current high cost of appraisals. The only problem is "back in the day" was only a couple years ago. Today, a typical conventional loan appraisal costs $500 and an FHA appraisal can cost $600. Why has the cost increased so much in such a short time?

Several factors are to blame, and we'll examine them today and tomorrow.

- After the financial crisis, regulators decided that because a few loan officers at Washington Mutual Bank had leaned on appraisers to falsify values that all loan officers should be punished. (Reminds me of elementary school, but then again, so do a lot of things the government does.) As a result, appraisals now are ordered through an appraisal company middleman. And, of course, the middleman charges a fee.

Initially, the middlemen just took their fee from the appraiser's fee, meaning appraisers received less. However, recent legislation required that appraisers receive their usual fee, so middleman fees forced appraisal prices to rise.

Tomorrow, we'll examine a couple other factors and the effect these may have on the broader housing market.