Appraisal myths debunked

By law, an appraiser is required to be state-licensed to offer appraisals for federally-related purchases. Also by law, you are entitled to demand a copy of the completed appraisal report from your lender. Contact us if you have any concerns about the appraisal procedure.

Myth: Market value should be the same as the assessed value of the property.

Fact: While most states support the suggestion that assessed value is the same as estimated market value, this commonly is not the case. Examples include when interior remodeling has happened and the assessor has not seen the improvements, or when properties in the vicinity have not been reassessed for an extended period of time.

Myth: The buyer or the seller will have some pull in the value of the home depending upon for whom the appraiser is working.

Fact: The opinion of value of the property does not affect the payment of the appraiser; due to this, the appraiser has no preconceived interest in the cost of the property. What this means is he will provide business with impartiality and independence regardless for whom the appraisal is produced.

Myth: Market value will equal replacement cost.

Fact: The way market value is arrived at is based on what a home buyer would likely pay a willing seller for a house without being under influence from any outside party to buy or sell. If the home were rebuilt, the dollar amount necessary to do so would set the replacement cost.

Myth: Specific formulae, such as the price per square foot of the property, are the methods appraisers use to ascertain the price of a house.

Fact: There are many numerous methods that an appraiser will use to make a detailed analysis of every factor pertaining to the house, such as the size, location, condition, how close it is to certain facilities and the cost of recently sold comparable homes.

Myth: In a robust economy - when the prices of properties in a given region are found to be rising by a particular percentage - the worth of individual homes in the area can be expected to appreciate by that same percentage.

Fact: All appreciation of price is on an individual basis, determined by information on relevant conditions and the data of comparable homes. This is true in strong economic times as well as bad.

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Myth: The house's exterior is determinate of the actual worth of the home; it is unnecessary to do an interior appraisal.

Fact: House value is determined by a multitude of factors, including - but not limited to - location, condition, improvements, amenities, and market trends. Obviously, none of these factors can be derived just by examining the house from the outside.

Myth: Because consumers pay for the appraisal when applying for loans to purchase or refinance real estate, they legally own their appraisal.

Fact: Legally, the appraisal is owned by the lender unless the lender relinquishes their interest in the report. Under the Equal Credit Opportunity Act, any consumer requesting a copy of the appraisal report must be provided with it by their lender.

Myth: There's no need for home buyers to even worry about what the report contains so long as their lending company is satisfied.

Fact: Only if consumers examine a copy of their report can they ensure its accuracy and possibly need to question the result. 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, since 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: Appraisals are ordered only to estimate home values in property sales involving mortgage-lending transactions.

Fact: Depending upon their qualifications and designations, appraisers can and often do provide a variety of different services, including advice for estate planning, dispute resolution, zoning and tax assessment review and cost/benefit analysis.

Myth: A house inspection serves the same purpose as an appraisal.

Fact: Appraisal reports have almost nothing in common with a home inspection. The point of an appraisal is to form an opinion of fair market value during the appraisal process and the completion of the appraisal. The point of a home inspector is to assess the condition of the property and its major components, then write a report on these inspection.