Appraisal myths & facts
By law, an appraiser needs to be state-licensed to offer appraisals for federally-supported transactions. You also have the right to demand a copy of the completed appraisal report from your lender. Contact our professional staff if you have any questions about the appraisal procedure.
Myth: Market value needs to be equivocal to the assessed value of the property.
Fact: While most states back the idea that assessed value approximates estimated market value, this often is not the case. Examples include when interior remodeling has happened and the assessor has not seen the improvements, or when properties in the area have not been reassessed for an extended period.
Myth: Depending on if the appraisal is ordered for the buyer or the seller, the appraised value of the house will vary.
Fact: The value of the house does not affect the pay of the appraiser; as such, the appraiser has no personal interest in the worth of the house. Obviously, he will complete his task with impartiality and independence regardless for whom the appraisal is produced.
Myth: Any time market value is found, it should be the same as the replacement cost of the home.
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 particular house. If the property were reconstructed, the dollar amount required to do so would make up the replacement cost.
Myth: Specific methods, like the price per square foot of the property, are the methods appraisers use to ascertain the cost of a property.
Fact: There are many numerous methods that an appraiser will use to make a comprehensive analysis of every factor in consideration of the house, such as the size, location, condition, how close it is to certain facilities and the cost of recently sold comparable homes.
Myth: When the economy is robust and the sales prices of houses are reported to be appreciating by a certain percentage, the other properties in the vicinity can be expected to rise based on that same percentage.
Fact: Cost appreciation of a certain property must be concluded on an individualized basis, factoring in data on comparable homes and other relevant specifications within the home itself. It doesn't matter if the economy is doing well or declining.
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Myth: You can often tell what a house is worth simply by looking at the exterior.
Fact: There are a number of different factors that show property value; these factors include area, condition, improvements, amenities, and market trends. An exterior inspection definitely can't provide all of the data necessary.
Myth: Since you're the one coughing up the cash for the appraisal when applying for your loan to purchase or refinance your house, you own the provided appraisal.
Fact: Legally, the document is owned by the lender unless the lender relinquishes their interest in the report. By the Equal Credit Opportunity Act, any consumer requesting a copy of the appraisal report must be given it by their lending agency.
Myth: There's no need for home buyers to even worry about what the appraisal report contains so long as their lender is fine with the contents therein.
Fact: It is very important for consumers to peruse a copy of their report so that they can double-check the accuracy of the document, in case it's required to question its accuracy. Remember, this is probably the most expensive and important investment a consumer will ever make. There is a wealth of information contained in an appraisal that should be useful to the consumer in the future, such as 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 proximity.
Myth: The only reason someone would order an appraisal is if a property needs its value estimated in a lender-based sales transaction.
Fact: Based upon their qualifications and designations, appraisers can and will perform a variety of different services, including advice for estate planning, dispute resolution, zoning and tax assessment review and cost/benefit analysis.
Myth: An appraisal report is the same as a home inspection report.
Fact: An appraisal report does not serve the same purpose as an inspection. An appraiser concludes on an opinion of value in the appraisal process and resulting document. The purpose of a home inspector is to find the condition of the house and its main components, then compose a report on these conclusions.