Appraisal myths debunked

By law, an appraiser is enforced to be state-licensed to offer appraisals for federally-backed transactions. Also by law, you have the ability to receive a copy of the completed appraisal from your lending agency. Contact our professional staff if you have any questions about the appraisal process.

Myth: Market value will always be similar to the assessed value of the property.

Fact: This usually isn't true; most states do support the suggestion that the assessed value is the same as market value, but not always. Interior remodeling that the assessor is not aware of and a lack of reassessment on nearby houses are perfect examples of why there might be a differential in price.

Myth: The value of a property will vary depending upon whether the appraisal is conducted for the buyer or the seller.

Fact: The appraiser has no personal interest in the result of the report and should render his task with independence, objectivity and impartiality - no matter for whom the appraisal is provided.

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

Fact: Market value is found by what a willing buyer would be interested in paying a willing seller for a certain property, with neither being under pressure to buy or sell. Replacement value is the dollar amount needed to rebuild a property in-kind.

Myth: Certain formulae, such as the price per square foot, are the methods appraisers use to determine the cost of a house.

Fact: Appraisers complete an exhaustive analysis of all factors pertaining to the cost of a house, including its location, condition, size, proximity to facilities and recent sale prices of comparable homes.

Myth: As homes increase their worth by a certain percentage - in a robust economic state - the homes in proximity are expected to increase by the same amount.

Fact: Value appreciation of a specific property has to be determined on a case-by-case basis, factoring in data on comparable homes and other relevant elements. This is true in excellent economic times as well as bad.

Myth: Just seeing what the home looks like on its exterior gives an idea of its worth.

Fact: To conclude an accurate value beyond all doubt, an appraiser must inspect the property on a variety of factors based on area, condition, improvements, amenities, and current market trends. Obviously, none of these variables can be derived just by examining the home from the outside.

Myth: Because consumers fund appraisal reports when applying for loans to buy or refinance their home, they legally own their appraisal.

Fact: Legally, the report is owned by the lending agency unless the lender releases their interest in the document. Consumers have to be provided with a copy of the report through request due to the Equal Credit Opportunity Act.

Myth: There's no need for home buyers to even care about what the appraisal contains so long as their lender is fine with the contents therein.

Fact: A home buyer should definitely look through their document; there might be some questions or some concerns about the accuracy of the inspection that must be addressed. Remember, this is probably the most expensive and important investment a consumer will ever make. There is a great deal of data contained in an appraisal report that can be useful to the home buyer in the future, such as 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.