Bank appraisal before financing approval

Hello dear forum, my husband and I want to purchase a farm estate with 5 hectares of land in the rural area. We have now been pursuing the same property for a year... Therefore, we are well aware of the difficulties of financing such a "lifestyle property." Some things have recently developed in our favor, and inquiries to banks are happening again. According to our financial advisor, a reputable financial institution is still in the running but has not yet promised us financing or shared conditions. First, they now want to send an appraisal, which is normal at first and is basically not a problem for us. However, it is supposed to work like this: If financing is approved, we do not have to pay for the appraisal (which would also be illegal). If the bank rejects financing after the appraisal, we are supposed to cover the cost of the appraisal but would not even receive it. We are quite desperate because most banks refuse at the word "farm estate," but that all sounds anything but fair to us. Maybe someone here has experienced something similar and can help us... We are grateful for any advice! Best regards from NRW, Projekt Resthof

A reputable financial institution is according to our financial advisor still in the race, but has not yet promised us any financing or communicated terms. First, they now want to send an appraisal, which is basically normal and is not a problem for us in principle.

That is also normal.

However, it is supposed to work like this: If financing is granted, we do not have to pay for the appraisal (which would also be illegal). If the bank rejects financing after appraisal, we are supposed to cover the cost of the appraisal, but would not even receive it.

And? Where is the problem? Are you convinced by the property or not? Does it come down to a few euros if it is your dream property? A side letter will be drawn up and you take over the costs. If you can only get financing for the property with an appraisal, why don't you do that? Honestly, I find it totally fair of the bank. If the property is okay, you get the financing. Then you pay for the appraisal through the terms. If the property is rubbish, someone has to pay for the bank’s effort. And that is by far not covered by the appraisal costs. Oh yes, the bank would otherwise also be left with the costs if you finance elsewhere. In our commercial sector, assuming the costs for the appraisal (whether financing is closed or not) and/or a mandate fee in case the customer backs out is absolutely normal. We do not work for free only for the customer to go elsewhere. Services have to be paid for. Additionally, the question: what exactly does "Resthof" mean for you? Agricultural operation or "just" living?

So if I have to pay for the report, then I would like to have a copy...

That's normal.

So what? Where is the problem? Are you convinced by the property or not? Does it come down to a few euros when it’s your dream property? A side letter is drawn up and you take on the costs.

If you can only get financing for the property with an expert report, why don’t you do that?
Honestly, I find it totally fair from the bank. If the property is okay, you get the financing. Then you pay for the report through the terms.
If the property is no good, someone has to pay for the bank’s effort. And that is by no means covered by the expert costs. Oh yes, the bank is otherwise stuck with the costs if you finance elsewhere.

In our commercial sector, it is absolutely normal for the costs of the expert report to be borne (regardless of whether the financing is completed or not) and/or also a mandate fee in case the client pulls out. We do not work for nothing and the client goes elsewhere. Services must be paid for.

Additionally, the question of what exactly “Resthof” means for you? Agricultural business or “just” residential?

Well. I see it differently. The inadmissibility of passing expert costs onto the customer has been confirmed in numerous rulings (also by the highest courts).
In this case also, from my point of view, the expert report is purely in the bank’s interest to reliably determine the risk assessment.

The argument that this is common practice in the commercial sector is not one. The German legal system does not make fundamental differences between end consumers and commercial operators for nothing. Explaining this here would go too far.

The argument that this is common practice in the commercial sector is not an argument.

Oh yes, in the commercial sector the entire pricing for financing is actually transparent. In consumer loans, however, it is absolutely not – even though consumer advocates promote it again and again. But the discussion really goes too far.

The inadmissibility of passing on expert appraisal costs to the customer has been confirmed in numerous rulings (including by the highest courts).

That is why the expert appraisal costs are not directly linked to the loan here. Thus it is legitimate if the customer commissions the bank to prepare an appraisal at his own cost. If the customer does not want that, he should finance elsewhere. It’s quite simple.

Also in this case, the appraisal, in my view, is purely in the interest of the bank to reliably determine risk assessment.

Completely correct. How else should the bank assess and price the risk for an exotic property? That is done with every financing before the contracts are concluded.

The OP is forced into nothing. He can freely decide whether he wants the appraisal with the chance to then get financing or to look for another property. But anyone who has been involved with the property for a year already (which apparently is also hard to sell) and for whom it is THE dream property, should not be asking for advice here but should have already commissioned the appraisal long ago. It won’t be that expensive, and if it fails because of a few thousand euros anyway, then one should just completely let it go.

Hello everyone,
thank you very much for the previous answers.
A small addition: there is no active farming being carried out there, although the meadows are still leased to a farmer this year. Therefore, it is a private, not a commercial purchase.
If I were to receive the appraisal in the event of a financing refusal, that would still be okay... Although we would only have it for ourselves, since other banks only accept their own appraisals again. In any case, I find this extremely questionable. We really have no other choice but to agree to it or we risk losing one of the few potential financing partners.