Appraisal myths & facts

It is enforced by law that a real estate appraiser needs to be state-licensed to perform appraisals for federally-supported real estate purchases in Colorado. The law gives you the right to get a copy of your finished appraisal from your lender after it has been produced. Contact us if you have any concerns about the appraisal process.

Myth: The value that is assessed by the appraiser must be equivalent to the market value.

Fact: While most states back the concept that assessed value approximates estimated market value, this usually is not the case. Usually when interior remodeling has occurred and the assessor is unaware of the improvement or other homes in the neighborhood have not been reassessed for quite some time, it may vary wildly.

Myth: The buyer or the seller sometimes may have leverage in the cost of the home depending upon for whom the appraiser is working.

Fact: There is no real interest on the part of the appraiser in the result of the analysis, therefore he will conduct his work with impartiality and independence, despite for whom the appraisal is written.

Myth: Any time market value is established, it should be the same as the replacement cost of the home.

Fact: Without any pressure from any external parties to purchase or sell, market value is what a willing buyer would pay an interested seller for a particular home. If the property were rebuilt, the dollar amount needed to do so would set the replacement cost.

Myth: Specific formulae, like the price per square foot of the property, are the ways appraisers use to arrive at the cost of a house.

Fact: There are many varied calculations that an appraiser will use to make an in-depth analysis of every factor pertaining to the home, such as the size, location, condition, how close it is to undesirable facilities and the value of recently sold comparable houses.

Myth: When the economy is strong and the value of houses are reported to be rising by a certain percentage, the other properties in the neighborhood can be expected to appreciate based on that same percentage.

Fact: All appreciation of price is on a case-by-case basis, found by data on relevant elements and the data of comparable houses. It doesn't matter if the economy is doing well or declining.

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Myth: Just seeing what the property looks like on the outside gives a good idea of its value.

Fact: There are a number of different variables that determine property value; these factors include area, condition, improvements, amenities, and market trends. Obviously, none of these things can be derived just by inspecting the property from the exterior.

Myth: Because consumers fund the appraisal when applying for loans to buy or refinance their house, they own their appraisal report.

Fact: Unless a lending agency releases its interest in the document, it is legally owned by the lending company that ordered the appraisal. Consumers have to be provided with a copy of the appraisal report upon written request because of the Equal Credit Opportunity Act.

Myth: There's no point for home buyers to even care about what the appraisal contains so long as their lending company is fine with the contents therein.

Fact: A consumer should definitely read through their appraisal report; there might be some questions or some concerns about the accuracy of the inspection that must be addressed. Remember, this is probably the most expensive and important investment a consumer will ever make. There is a wealth of information stored in an report that should be useful to the home buyer 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 region.

Myth: The only reason someone would order an appraisal is if a property needs its cost assessed in a lender-based sales transaction.

Fact: Appraisers can have many varied qualifications and designations which allow them to provide a multitude 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: There's no reason to get an appraisal if you order a home inspection.

Fact: Appraisal reports have almost nothing in common with a home inspection report. An appraiser concludes on an opinion of value in the appraisal process and resulting document. The point of a home inspector is to determine the condition of the home and its main components, then provide a report on their findings.