Common myths about appraising
By law, an appraiser is required to be state-licensed to produce appraisals for federally-backed transactions. Also by law, you have the right to request a copy of the completed appraisal from your lender. Contact our professional staff if you have any questions about the appraisal procedure.
Myth: Market value will always be equivocal to the assessed value of the property.
Fact: While most states support the idea that assessed value is the same as estimated market value, this often is not the case. Examples include when interior remodeling has happened and the assessor has not seen the improvements, or when homes in the area have not been reassessed for an prolonged period of time.
Myth: The buyer or the seller may have leverage in the cost of the property depending upon for whom the appraiser is working.
Fact: There is no vested interest on the part of the appraiser in the outcome of the appraisal report, therefore he will complete his work with impartiality and independence, regardless for whom the appraisal is written.
Myth: The replacement value of the property should be is on par with the market value.
Fact: The way market value is arrived at is based on what a buyer would be willing to pay a willing seller for a property without being under pressure from any outside group to purchase or sell. The replacement cost is the dollar amount necessary to reconstruct a home in-kind.
Myth: There are specific methods that appraisers use to show the opinion of value of a house, such as the price per square foot.
Fact: There are many different methods that an appraiser will use to make an in-depth investigation of every factor in consideration of the house, such as the size, location, condition, how close it is to specific facilities and the sales price of recently sold comparable properties.
Myth: When the economy is robust and the cost of homes are found to be rising by a certain percentage, the other houses in the proximity can be expected to increase based on that same percentage.
Fact: Any value at which an appraiser concludes in regards to a specific property is always individualized, based on certain factors found from the information of comparable properties and other specifications within the house itself. It doesn't matter if the economy is doing well or declining.
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Myth: Just looking at what the house looks like on its exterior gives an idea of its cost.
Fact: There are a number of different factors that determine property value; these factors include area, condition, improvements, amenities, and market trends. An exterior inspection definitely can't provide all of the information needed.
Myth: Since you're the one funding for the appraisal when applying for your loan to buy or refinance your home, you own the provided appraisal report.
Fact: The appraisal is, in fact, legally owned by the lending company - unless the lender "relinquishes its interest" in the document. However, home buyers have to be given a copy of the appraisal report upon written request, due to the Equal Credit Opportunity Act.
Myth: It doesn't concern consumers what's in the appraisal report so long as it satisfies the needs of their lending agency.
Fact: It is a very good idea for home buyers to read a copy of their appraisal so that they can double-check the accuracy of the document, in case they need to question its veracity. 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, since it contains an incredible amount of information - including, but certainly 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 price of a home during a sales transaction involving a lending agency.
Fact: Depending upon their qualifications and designations, appraisers can and do provide a variety of 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: A home inspection report 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 production of the report. A home inspector assesses the condition of the building and its main components and reports their findings.