Appraisal myths & facts
By law, an appraiser needs to be state-licensed to perform appraisals for federally-backed sales. Also by law, you have the ability to receive a copy of the finished appraisal from your lender. Contact us if you have any questions about the appraisal process.
Myth: The value that is assessed by the appraiser is required to be the same as the market value.
Fact: This is not often the case; most states do support the idea that the assessed value is the same as market value, but not always. Sometimes when interior remodeling has been done and the assessor is has not investigated the improvement or other homes in the neighborhood have not been reassessed for years or more, it may vary wildly.
Myth: The opinion of value of a property will be different depending upon whether the appraisal is conducted for the buyer or the seller.
Fact: There is no vested interest on the part of the appraiser in the outcome of the analysis, therefore he will conduct his work with impartiality and independence, no matter for whom the appraisal is ordered.
Myth: Market value should approximate replacement cost.
Fact: Without any influence from any different parties to buy or sell, market value is what a willing buyer would pay an interested seller for a specific property. Replacement cost is the dollar amount required to reconstruct a home in-kind.
Myth: Specific formulae, such as the price per square foot of the property, are the methods appraisers use to come to the price of a property.
Fact: Appraisers complete a detailed analysis of all factors in consideration to the cost of a house, including its location, condition, size, proximity to facilities and recent sale prices of comparable houses.
Myth: In a robust economy - when the costs of homes in a given county are reported to be increasing by a particular percentage - the costs of individual houses in the proximity can be expected to increase by that same percentage.
Fact: Value appreciation of a specific home has to be concluded on a case-by-case basis, factoring in information on comparable properties and other relevant elements. This is true in strong economic times as well as bad.
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Myth: Just looking at what the property looks like on the outside gives a good idea of its value.
Fact: To conclude an accurate price beyond all doubt, an appraiser must assess the home on a variety of factors based on location, condition, improvements, amenities, and current market trends. As you can see, none of these variables can be derived simply by viewing the home from the outside.
Myth: Since you're the one funding for the appraisal report when applying for the loan to purchase or refinance your home, you own the ordered appraisal report.
Fact: Unless a lender releases its interest in the report, it is legally owned by the lending agency that ordered the appraisal. Because of the Equal Credit Opportunity Act, any home buyer demanding a copy of the report must be provided with it by their lending company.
Myth: Consumers need not worry about what is in their document so long as it exceeds the necessities of their lending company.
Fact: It is a very good idea for consumers to go through a copy of their appraisal report so that they can double-check the accuracy of the report, in case they need to question its veracity. Remember, this is probably the most expensive and important investment a consumer will ever make. An report can double as a record for the future, as it contains an exorbitant amount of information - including, but not limited to the legal and physical description of the property, square footage measurements, list of comparable properties in the neighborhood, neighborhood description and a narrative of current real-estate activity and/or market trends in the vicinity.
Myth: There is no reason to order an appraisal unless you are trying to get an estimate of the price of a home during a sales transaction involving a lender.
Fact: Appraisers can have many varied qualifications and designations which allow them to perform a variety of different services including - but certainly not limited to - advice on estate planning, tax assessment, zoning, dispute resolution in many different legal situations and cost analysis.
Myth: A home inspection serves the same purpose as an appraisal.
Fact: An appraisal report does not fulfill the same purpose as an inspection report. An appraiser decides upon an opinion of value in the appraisal process and resulting appraisal report. House inspectors will create a report that will express the condition of the home and its major components and possible damage.