Though my banks did require an appraisal, and the appraiser does do a physical inspection to look for signs of gross neglect. Many buyers here also waive their appraisal contingency too, so if the appraisal comes in low, the buyer has to kick in more cash to cover the difference in the loan value.
Even if we paid their fee they wouldn't even send someone out to look at the house, it would be 100% just looking at comps in the area--which we dismissed because it was the middle of the housing crash and almost every comp was a short sell of a unit that had been utterly trashed/gutted on the inside.
An appraisal without visiting the property does sound like a scam, how do they know the inside of the house is not gutted?
I can understand why the bank requires an appraisal, so it's not purely a scam, but I don't think it's an accident that most appraisals come in exactly at the selling price. The bank needs some independent 3rd party to verify that the house really exists and is not completely trashed. I assume the appraisers usually just take the selling price and work backwards to find comps and adjustments to support it rather than starting with the comps to come up with a fair selling price.
Though that's not always the case, I did have an appraiser save me $20K once -- the appraisal came in at $25K under the accepted offer price, the seller asked me to kick in an extra $25K on the loan, I said I couldn't. They asked me to meet them half way, and I said I couldn't, but I'd offer an extra $5K. They accepted and the deal went through.
The seller appealed the appraisal (the comps weren't perfectly comparable), but they already had a property lined up to purchase and didn't want me to walk, so they finally accepted the lower price. A month later an identical property in my complex sold for $50K higher than my original offered price (so $70K higher than what I paid). The SF Bay Area is a weird market.
I bought i super unique house, 100 years old out in the country. While talking to the appraiser asking him if the house was worth what i had offered, he said somthing like 'well if thats what your offering thats what it's worth'.
In hindsight, the market would tell me the house definately was not worth it.
Really i think the appraiser is there to prevent simple fraud.
The appraisers real job (when a mortgage is involved) for the bank is to assess the best offer they could get besides yours, since the bank wants to know what the property would sell for were your unable to pay the mortgage.
Presumably, if you are buying the house, you are (exceptions clearly exist, this is a simplified model) the most interested buyer, they really should be looking as to what the next most interested buyer would pay.
With large enough markets and commodity properties, which probably account for most housing sales, it's not entirely unreasonable to assume that the difference between those two is negligible, though, so I can see how it becomes a default approach.
The actual home inspector spent an hour or two inspecting the house and charged much less. I'd gladly pay him again.