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APPRAISAL MYTHS
 
Some Myths and Realities about Real Estate Appraisals and Appraisers
Myth: Assessed value should equate
to market value.
Reality: While most states support the concept that assessed
value approximate estimated market value, this often is not the case. Examples
include when interior remodeling has occurred and the assessor is unaware
of the improvements, or when properties in the vicinity have not been reassessed
for an extended period.
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 for whom the appraisal is conducted.
Myth: Market value should approximate
replacement cost.
Reality: Market value is based on what a willing buyer
likely would pay a willing seller for a particular property, with neither
being under pressure to buy or sell. Replacement cost is the dollar amount
required to reconstruct a property in-kind.
Myth: Appraisers use a formula, such
as a specific price per square foot, to figure out the value of a home.
Reality: Appraisers make a detailed analysis of all factors
pertaining to the value of a home including its location, condition, size,
proximity to facilities and recent sale prices of comparable properties.
Myth: In a robust economy - when the
sales prices of homes in a given area are reported to be rising by a particular
percentage - the value of individual properties in the area can be expected
to appreciate by that same percentage.
Reality: Value appreciation of a specific property must
be determined on an individualized basis, factoring in data on comparable
properties and other relevant considerations. This is true in good times
as well as bad.
Myth: You generally can tell what a
property is worth simply by looking at the outside.
Reality: Property value is determined by a number of factors,
including location, condition, improvements, amenities, and market trends.
Myth: Because consumers pay for appraisals
when applying for loans to purchase or refinance real estate, they own their
appraisal.
Reality: The appraisal is, in fact, legally owned by the
lender - unless the lender "releases its interest" in the document. However,
consumers must be given a copy of the appraisal report, upon written request,
under the Equal Credit Opportunity Act.
Myth: Consumers need not be concerned
with what is in the appraisal document so long as it satisfies the needs
of their lending institution.
Reality: Only if consumers read a copy of their appraisal
can they double-check its accuracy and question the result. Also, it makes
a valuable record for future reference, containing useful and often-revealing
information - including 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: Appraisers are hired only to
estimate real estate property values in property sales involving mortgage-lending
transactions.
Reality: 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: An Appraisal is the same as a
home inspection.
Reality: An Appraisal does not serve the same purpose as
an inspection. The Appraiser forms an opinion of value in the Appraisal process
and resulting report. A home inspector determines the condition of the home
and its major components and reports these findings.
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