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.