Common myths about appraising
Legally, a real estate appraiser has to be state certified to perform substantiated real estate appraisals for federally-related sales. You also have the right to acquire a copy of the completed report from your lender. Contact our professional staff if you have any concerns about the appraisal process.
Myth: Market value needs to be similar to the assessed value of the property.
Fact: While most states uphold the idea that assessed value is the same as estimated market value, this often is not the case. Examples include when interior reconstruction has occurred and the assessor is unaware of the improvements, or when homes in the area have not been reassessed for an extended period.
Myth: The opinion of value of a property will be different depending upon if the appraisal is provided for the buyer or the seller.
Fact: The appraiser has no vested interest in the result of the appraisal report and should conduct his task with independence, objectivity and impartiality - no matter for whom the appraisal is written.
Myth: The replacement cost of the property is always is on par with the market value.
Fact: The way market value is arrived at is based on what a home buyer would be willing to pay a willing seller for a property without being under influence from any external party to buy or sell. The dollar amount necessary to rebuild a property is what constitutes the replacement cost.
Myth: Certain methods, such as the price per square foot, are the ways appraisers use to determine the cost of a property.
Fact: There are many differing formulae that an appraiser will use to make a detailed analysis of every factor pertaining to the property, such as the size, location, condition, how close it is to undesirable facilities and the sales price of recently sold comparable homes.
Myth: As houses appreciate by a specific percentage - in a strong economy - the properties nearby are expected to appreciate by the same amount.
Fact: All increase of price is on a one-on-one basis, found by data on relevant conditions and the data of comparable homes. This is true in excellent economic times as well as poor.
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Myth: The house's outside is determinate of the actual value of the house; it is unnecessary to do an interior inspection.
Fact: To conclude an accurate worth beyond all doubt, an appraiser must inspect the house on a variety of factors based on area, condition, improvements, amenities, and market trends. There's no real way to get all of this information from just viewing the property from the outside.
Myth: Because consumers pay for the appraisal when applying for loans to purchase or refinance their house, they legally own their appraisal report.
Fact: Unless a lender releases its interest in the appraisal report, it is legally owned by the lending agency that ordered the appraisal. Because of the Equal Credit Opportunity Act, any consumer asking for a copy of the document must be given it by their lender.
Myth: There's no point for home buyers to even worry about what the appraisal contains so long as their lender is fine with the contents therein.
Fact: Only if consumers look through a copy of their appraisal 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. There is an incredible amount of data contained in an report that could 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 area.
Myth: There is no reason to hire an appraiser unless you are trying to get an estimate of the cost of a house during a sales transaction involving a lender.
Fact: Depending upon their qualifications and designations, appraisers can and often do perform a lot of services, including advice for estate planning, dispute resolution, zoning and tax assessment review and cost/benefit analysis.
Myth: You don't have to get an appraisal if you order a home inspection.
Fact: An appraisal report does not serve the same purpose as an inspection report. The reason behind an appraisal report is to find an opinion of fair market value during the appraisal process and the production of the report. House inspectors will write a report that will show the condition of the house and its major components and possible damage.