Appraisal myths & facts
It is mandated by the government that an appraiser is required to be state-licensed to produce appraisal reports for federally-related real estate purchases in California. You are also entitled by law to demand a copy of the finished report from your lender. Contact us if you have any questions about the appraisal procedure.
Myth: Assessed value will always equate to market value.
Fact: It might be that California, like most states, supports the common myth that the assessed value is the same as the market value; however, this is not often the case. Often when interior remodeling has been done and the assessor is unaware of the improvement or other houses in the neighborhood have not been reassessed for a good length of time, it may vary wildly.
Myth: The opinion of value of a property will vary depending upon whether the appraisal is produced for the buyer or the seller.
Fact: The appraiser has no vested interest in the outcome of the report and should render services with independence, objectivity and impartiality - no matter for whom the appraisal is written.
Myth: The replacement value of the property is always is on par with the market value.
Fact: Market value is acquired by what a willing buyer would be interested in paying a willing seller for a specific house, with neither being under pressure to buy or sell. If the home were reconstructed, the dollar amount necessary to do so would make up the replacement cost.
Myth: There are specific ways that real estate appraisers use to show the opinion of value of a property, like the price per square foot.
Fact: Appraisers make an exhaustive analysis of all factors pertaining to the worth of a house, including its location, condition, size, proximity to facilities and recent sale prices of comparable properties.
Myth: When the economy is robust and the cost of properties are found to be increasing by a certain percentage, the other properties in the proximity can be expected to appreciate based on that same percentage.
Fact: Any worth at which an appraiser arrives in regards to a certain home is always individualized, based on certain factors found from the data of comparable houses and other specifications within the house itself. It makes no difference whether the economy is excellent or on the decline.
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Myth: Just seeing what the house looks like on its exterior gives an excellent idea of its cost.
Fact: There are a multitude of different variables that conclude the value of a house; these factors include area, condition, improvements, amenities, and market trends. As you can see, none of these factors can be derived just by examining the house from the outside.
Myth: Because consumers pay for appraisal reports when applying for loans to purchase or refinance their home, they legally own their appraisal report.
Fact: The document is, in fact, legally owned by the lender - unless the lender "releases its interest" in the report. Home buyers must be provided with a copy of the document upon written request as per the Equal Credit Opportunity Act.
Myth: Consumers need not worry about what is in their report so long as it exceeds the needs of their lending company.
Fact: It is very important for home buyers to go through a copy of their appraisal report so that they can double-check the accuracy of the document, in case there is a need to question its accuracy. Remember, this is probably the most expensive and important investment a consumer will ever make. An appraisal report can double as a record for the future, containing an exorbitant amount of 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 vicinity.
Myth: Appraisals are ordered only to estimate building values in house sales involving mortgage-lending deals.
Fact: Based upon their qualifications and designations, appraisers can and will perform a multitude of different services, including advice for estate planning, dispute resolution, zoning and tax assessment review and cost/benefit analysis.
Myth: A house inspection serves the same purpose as an appraisal.
Fact: A home inspection serves a completely different purpose than an appraisal. An appraiser finds an opinion of value in the appraisal process and resulting appraisal. House inspectors will compose a report that will express the condition of the property and its major components and possible damage.