Appraisal myths debunked
By law, an appraiser needs to be state-licensed to offer appraisals for federally-related transactions. You are also entitled by law to receive a copy of the completed report from your lender. Contact Astute Appraisals, Inc. if you have any questions about the appraisal procedure.
Myth: The value that is ascertained by the appraiser should be the same as the market value.
Fact: While most states support the suggestion that assessed value approximates estimated market value, this often is not the case. Interior reconstruction that the assessor is not aware of and a lack of reassessment on nearby properties are prime examples of why this occurs.
Myth: Depending on if the appraisal is ordered for the buyer or the seller, the value of the house will vary.
Fact: There is no vested interest on the part of the appraiser in the outcome of the analysis, therefore he will conduct his work with impartiality and independence, regardless for whom the appraisal is conducted.
Myth: The replacement value of the home should be is on par with the market value.
Fact: The way market value is found is based on what a buyer would likely pay a willing seller for a house without being under duress from any outside party to buy or sell. The replacement cost is the dollar amount required to reconstruct a home in-kind.
Myth: Appraisers use a calculation, like a certain price per square foot, to come to the value of a house.
Fact: Appraisers make a comprehensive analysis of all factors in consideration to the value of a property, including its location, condition, size, proximity to facilities and recent costs of comparable properties.
Myth: When the economy is doing well and the sales prices of homes are found to be appreciating by a certain percentage, the other properties in the proximity can be expected to appreciate based on that same percentage.
Fact: All appreciation of price is on a case-by-case basis, concluded by data on relevant conditions and the data of comparable homes. It doesn't matter if the economy is on the rise or declining.
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Myth: Just looking at what the house looks like on its exterior gives an excellent idea of its worth.
Fact: To determine an accurate worth beyond all doubt, an appraiser must inspect the property on a variety of factors based on area, condition, improvements, amenities, and market trends. An external inspection definitely can't provide all of the data required.
Myth: Considering that the consumer is the one who provides the capital to pay for the appraisal report when applying for a loan for any real estate transaction, legally the appraisal report belongs to them.
Fact: The appraisal report is, in fact, legally owned by the lender - unless the lender "releases its interest" in the appraisal. Consumers must be provided with a version of the appraisal report through request as per the Equal Credit Opportunity Act.
Myth: It doesn't mean anything to consumers what's in the report so long as it satisfies the needs of their lender.
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. There is a great deal of information contained in an report that should be useful to the consumer 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 proximity.
Myth: There is no reason to order an appraisal unless you are trying to get an estimate of the price of a property during a sales transaction involving a lending agency.
Fact: Depending upon their qualifications and designations, appraisers can and will perform a lot of services, including advice for estate planning, dispute resolution, zoning and tax assessment review and cost/benefit analysis.
Myth: There's no reason to get an appraisal if you get a home inspection.
Fact: Appraisal reports are definitely not the same as a home inspection. The purpose of an appraisal is to arrive at an opinion of fair market value during the appraisal process and the production of the report. The purpose of a home inspector is to assess the condition of the house and its major components, then write a report on these inspection.