Appraisal Myths
Some Myths and Realities About
Real Estate Appraisals and Appraisers
Myth: Assessed value should equate to market value.
Reality: Some states support the concept that assessed value closely approximates estimated market val. This often is not the case. Sometimes the assessor is unaware of improvements made to the property, or if the property values in the neighborhood are not taken into account, the values may be incorrect.
Myth: The appraised value of a property will vary, depending upon whether the appraisal is conducted for the buyer or the seller.
Reality: The appraiser has no vested interest in the outcome of the appraisal and should render services with independence, objectivity and impartiality - no matter who the appraisal is prepared for.
Myth: Market value should approximate replacement cost.
Reality: Market value is based on what a willing buyer might pay a willing seller for a particular property. Replacement cost is the dollar amount required to reconstruct a similar property.
Myth: Appraisers use a formula, such as a specific price per square foot, to figure out the value of a home.
Reality: Many factors are considered by appraisers when arriving at a value. Some of these factors include the location, the condition, the size, proximity to facilities and recent sale prices of comparable properties.
Myth: When the sales prices of homes in a given area are rising by a particular percentage - the value of individual properties in the area are appreciating by that same percentage.
Reality: Value appreciation of a specific property must be determined on an individualized basis.
Myth: You generally can tell what a property is worth simply by looking at the outside.
Reality: Location, condition, improvements, amenities, market trends and other factors are taken into considerations for determining property value.
Myth: Because consumers pay for appraisals when applying for loans to purchase or refinance real estate, they own their appraisal.
Reality: Upon written request, under the Equal Credit Opportunity Act, the consumers must be given a copy of the appraisal report. But, the appraisal is actually owned by the lender, unless the lender releases the appraisal to the consumer.
Myth: Consumersdo not need to be concerned with what is in the appraisal document as long as it satisfies the needs of the lending institution.
Reality: Consumers need to read their appraisal to confirm the accuracy of the report. The appraisal also contains information that the consumer should refer this for future reference on such matters as the legal and physical description of the property, square footage measurements, list of comparable properties in the neighborhood, neighborhood description and current real-estate activity and/or market trends in the vicinity.
Myth: Appraisers are hired only to estimate real estate property values in property sales involving mortgage-lending transactions.
Reality: Appraisers can provide a variety of services, including advice on estate planning, dispute resolution, zoning and tax assessment review and cost/benefit analysis, and many more.
Reality: The Appraiser forms an opinion of value of a property. A home inspector determines the condition of the home and its major components.