Common myths about appraising

By law, an appraiser needs to be state-licensed to produce appraisals for federally-supported sales. Also by law, you have the right to request a copy of the finished appraisal from your lending agency. Contact us if you have any concerns about the appraisal process.

Myth: Assessed value will always be equal to market value.

Fact: While most states back the idea that assessed value approximates estimated market value, this commonly is not the case. Interior remodeling that the assessor has not investigated and a lack of reassessment on nearby properties are excellent examples of why the price can vary.

Myth: Depending on if the appraisal is drawn up for the buyer or the seller, the opinion of value of the property will vary.

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

Myth: Any time market value is found, it should be similar to the replacement cost of the home.

Fact: Without any pressure from any different parties to buy or sell, market value is what a willing buyer would pay a willing seller for a particular property. The dollar amount required to rebuild a home is what constitutes the replacement cost.

Myth: Appraisers use a formula, like a specific price per square foot, to figure out the cost of a home.

Fact: Appraisers make a comprehensive analysis of all factors pertaining to the value of a property, including its location, condition, size, proximity to facilities and recent opinion of value of comparable houses.

Myth: As houses appreciate by a specific percentage - in a robust economic state - the homes around the appreciating properties are figured to appreciate by the same amount.

Fact: Value increase of a certain home must be concluded on an individualized basis, factoring in information on comparable houses and other relevant considerations. It doesn't matter if the economy is doing well or declining.

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Myth: You can generally find what a property is worth simply by looking at the outside.

Fact: To determine an accurate value beyond all doubt, an appraiser must examine the home on a variety of factors based on area, condition, improvements, amenities, and current market trends. There's no real way to get all of this information from just inspecting the house from the exterior.

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

Fact: The appraisal is, in fact, legally owned by the lending agency - unless the lender "relinquishes its interest" in the appraisal report. Consumers must be supplied with a version of the appraisal report through request due to the Equal Credit Opportunity Act.

Myth: There's no reason for home buyers to even care about what the appraisal contains so long as their lending agency is satisfied.

Fact: Only if home buyers check out a copy of their report can they double-check its accuracy and possibly need to question the result. Remember, this is probably the most expensive and important investment a consumer will ever make. Also, the appraisal report makes an excellent record for future reference, comprised of useful and often-revealing data - including 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 proximity.

Myth: Appraisals are ordered only to estimate house values in property sales involving mortgage-lending deals.

Fact: Ordering an appraisal can fulfill a variety of requirements depending on the designations and certifications of the appraiser involved; appraisers can perform a variety of different services, including benefit/cost analysis, tax assessment, legal dispute resolution, and even estate planning.

Myth: You don't need to get an appraisal if you have had a home inspection.

Fact: A home inspection has a completely different purpose than an appraisal. The reason behind an appraisal is to find an opinion of fair market value during the appraisal process and the completion of the report. House inspectors will write a report that will show the condition of the home and its major components and possible damage.