Appraisal myths & facts
Legally, a real estate appraiser must be state certified to create legitimate real estate appraisals for federally-related transactions. You are also entitled by law to acquire a copy of the completed appraisal report from your lender. Contact our professional staff if you have any questions about the appraisal process.
Myth: Market value will be equivocal to the assessed value of the property.
Fact: While most states support the concept that assessed value is the same as estimated market value, this generally is not the case. Examples include when interior reconstruction has happened and the assessor does not know about the improvements, or when houses in the vicinity have not been reassessed for an extended time.
Myth: The buyer or the seller can have an influence in the value of the house depending upon for whom the appraiser is working.
Fact: There is no real interest on the part of the appraiser in the outcome of the analysis, therefore he will complete his work with impartiality and independence, despite for whom the appraisal is written.
Myth: Market value should equate to replacement cost.
Fact: Market value is derived from what a willing buyer would be interested in paying a willing seller for a specific home, with neither being under pressure to buy or sell. The dollar amount required to rebuild a house is what shows the replacement cost.
Myth: There are specific methods that appraisers use to find the cost of a property, such as the price per square foot.
Fact: Appraisers make an exhaustive analysis of all factors in consideration to the value of a home, including its location, condition, size, proximity to facilities and recent values of comparable houses.
Myth: When the economy is on the rise and the cost of houses are found to be rising by a certain percentage, the other houses in the neighborhood can be expected to appreciate based on that same percentage.
Fact: All increase of price is on a one-on-one basis, determined by information on relevant elements and the data of comparable properties. It makes no difference if the economy is good or on the decline.
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Myth: You can often tell what a home is worth simply by looking at the exterior.
Fact: To conclude an accurate price beyond all doubt, an appraiser must inspect the property on a variety of factors based on area, condition, improvements, amenities, and market trends. Obviously, none of these variables can be derived simply by examining the home from the outside.
Myth: Because consumers pay for appraisals when applying for loans to buy or refinance their home, they own their appraisal.
Fact: The report is, in fact, legally owned by the lender - unless the lender "releases its interest" in the appraisal report. By the Equal Credit Opportunity Act, any consumer demanding a copy of the report must be provided with one by their lender.
Myth: Consumers need not be concerned with what is in their report so long as it satisfies the necessities of their lending company.
Fact: A consumer should definitely look through their report; there may be some questions or some worries with the accuracy of the inspection that need to be addressed. Remember, this is probably the most expensive and important investment a consumer will ever make. An appraisal can serve as a record for the future, containing an exorbitant amount of data - including, but certainly 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: The only reason someone would order an appraisal is if a house needs its value assessed in a lender-based sales transaction.
Fact: Appraisers can have many different qualifications and designations which allow them to provide a multitude of different services including - but not limited to - advice on estate planning, tax assessment, zoning, dispute resolution in many different legal situations and cost analysis.
Myth: You shouldn't need to get an appraisal if you order a home inspection.
Fact: Appraisal reports are nothing like a home inspection. The appraiser concludes on an opinion of value in the appraisal process and resulting document. The purpose of a home inspector is to assess the condition of the home and its major components, then compose a report on their conclusions.