Common myths about appraising
By law, an appraiser is enforced to be state-licensed to produce appraisals for federally-backed sales. The law entitles you to get a copy of your completed report from your lender after it has been produced. Contact us if you have any concerns about the appraisal process.
Myth: The value that is assessed by the appraiser should be equivalent to the market value.
Fact: While most states uphold the concept that assessed value approximates estimated market value, this usually is not the case. Interior remodeling that the assessor has not investigated and a lack of reassessment on nearby homes are prime examples of why the price can vary.
Myth: The buyer or the seller sometimes may have leverage in the value of the home depending upon for whom the appraiser is working.
Fact: The appraiser has no vested interest in the result of the appraisal and should conduct his task with independence, objectivity and impartiality - no matter for whom the appraisal is provided.
Myth: Market value should approximate replacement cost.
Fact: Market value is based on what a willing buyer would likely pay a willing seller for a specific house, with neither being under undue influence to buy or sell. Replacement value is the dollar amount needed to reconstruct a house in-kind.
Myth: Certain formulae, like the price per square foot of the property, are the ways appraisers use to come to the value of a home.
Fact: There are many different formulae that an appraiser will use to make a detailed investigation of every factor in consideration of the property, such as the size, location, condition, how close it is to certain facilities and the cost of recently sold comparable homes.
Myth: As homes appreciate by a specific percentage - in a robust economic state - the properties nearby are figured to appreciate by the same amount.
Fact: All increase of worth is on an individual basis, found by data on relevant conditions and the data of comparable houses. It makes no difference if the economy is strong or bad.
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Myth: Just seeing what the property looks like on the outside gives an idea of its value.
Fact: House value is determined by a number of variables, including 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 the appraisal when applying for loans to buy or refinance their property, they own their appraisal.
Fact: Unless a lender releases its interest in the appraisal report, it is legally owned by the lending agency that ordered the appraisal. However, home buyers have to be given a copy of the report upon written request, under the Equal Credit Opportunity Act.
Myth: Home buyers need not be concerned with what is in their report so long as it exceeds the needs of their lending institution.
Fact: Only if home buyers examine 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. Also, the report makes a valuable record for future reference, containing useful and often-revealing information - 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: There is no reason to order an appraisal unless you are trying to get an estimate of the value of a home during a sales transaction involving a lending institution.
Fact: Based upon their qualifications and designations, appraisers can and do perform a lot of different services, including advice for estate planning, dispute resolution, zoning and tax assessment review and cost/benefit analysis.
Myth: A property inspection serves the same purpose as an appraisal.
Fact: An appraisal report does not fulfill the same purpose as an inspection report. The appraiser concludes on an opinion of value in the appraisal process and resulting report. A home inspector determines the condition of the house and its major components and reports their findings.