Common myths about appraising
By law, an appraiser must be state-licensed to offer appraisals for federally-supported sales. Also by law, you have the right to demand a copy of the finished report from your lender. Contact us if you have any questions about the appraisal procedure.
Myth: Market value has to be similar to the assessed value of the property.
Fact: While most states uphold the suggestion that assessed value approximates estimated market value, this usually is not the case. Interior reconstruction that the assessor is unaware of and a dearth of reassessment on nearby properties are exact examples of why the price can vary.
Myth: Depending on if the appraisal is produced for the buyer or the seller, the opinion of value of the house will vary.
Fact: The appraiser has no personal interest in the outcome of the appraisal and should render his job with independence, objectivity and impartiality - no matter for whom the appraisal is provided.
Myth: Market value should equate to replacement cost.
Fact: The way market value is found is based on what a home buyer would likely pay a willing seller for a property without being under pressure from any external party to buy or sell. The dollar amount needed to rebuild a home is what forms the replacement cost.
Myth: There are certain ways that appraisers use to show the value of a home, such as the price per square foot.
Fact: Appraisers make a detailed analysis of all factors in consideration to the cost of a property, including its location, condition, size, proximity to facilities and recent values of comparable properties.
Myth: As houses increase their worth by a certain percentage - in a robust economic state - the houses nearby are expected to increase by the same amount.
Fact: Any cost at which an appraiser concludes concerning a specific home is always individualized, based on certain factors pulled from the information of comparable homes and other specifications within the house itself. This is true in good economic times as well as bad.
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Myth: Just looking at what the house looks like on its exterior gives an excellent idea of its value.
Fact: House value is determined by a multitude of variables, including area, condition, improvements, amenities, and market trends. As you can see, none of these things can be derived just by viewing the house from the outside.
Myth: Because the consumer is the party who provides the funding to pay for the appraisal when applying for a loan for any real estate transaction, legally the appraisal report is theirs.
Fact: The appraisal is, in fact, legally owned by the lending agency - unless the lender "releases its interest" in the appraisal report. Home buyers must be provided with a copy of the document through request as per the Equal Credit Opportunity Act.
Myth: There's no point for home buyers to even worry about what the report contains so long as their lending agency is satisfied.
Fact: It is a very good idea for consumers to read a copy of their appraisal so that they can double-check the accuracy of the report, in case it's required to question its veracity. Remember, this is probably the most expensive and important investment a consumer will ever make. Also, the report makes a near perfect record for future reference, containing helpful and often-revealing data - 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 area.
Myth: Appraisals are ordered only to assess home values in home sales involving mortgage-lending transactions.
Fact: Appraisers can have many different qualifications and designations which allow them to perform 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: A house inspection serves the same purpose as an appraisal.
Fact: An appraisal report does not serve the same purpose as an inspection report. The appraiser decides upon an opinion of value in the appraisal process and resulting appraisal. A home inspector determines the condition of the house and its major components and reports these findings.