Appraisal myths debunked

By law, an appraiser must be state-licensed to produce appraisals for federally-backed sales. The law gives you the right to get a copy of your completed report from your lender after it has been provided. Contact our professional staff if you have any concerns about the appraisal process.

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

Fact: While most states back the idea that assessed value approximates estimated market value, this commonly is not the case. Interior reconstruction that the assessor has not investigated and a lack of reassessment on nearby homes are perfect examples of why there might be a differential in price.

Myth: The buyer or the seller sometimes may have leverage in the value of the home depending upon for whom the appraiser is working.

Fact: There is no personal interest on the part of the appraiser in the outcome of the appraisal report, therefore he will conduct his work with impartiality and independence, despite for whom the appraisal is conducted.

Myth: Any time market value is established, it should equal the replacement cost of the property.

Fact: Market value is based on what a willing buyer would be interested in paying a willing seller for a certain property, with neither being under undue influence to buy or sell. If the property were rebuilt, the dollar amount necessary to do so would set the replacement cost.

Myth: Specific formulae, such as the price per square foot of the property, are the ways appraisers use to determine the price of a property.

Fact: There are many differing formulae that an appraiser will use to make a detailed analysis of every factor in consideration of the home, 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 on the rise and the value of homes are found to be increasing by a certain percentage, the other properties in the proximity can be expected to rise based on that same percentage.

Fact: All increase of price is on a one-on-one basis, determined by data on relevant conditions and the data of comparable houses. It makes no difference if the economy is excellent or on the decline.

Myth: The house's exterior is determinate of the actual price of the house; it is unnecessary to do an interior inspection.

Fact: There are a multitude of different factors that conclude property value; these factors include area, condition, improvements, amenities, and market trends. As you can see, none of these factors can be found simply by viewing the house from the outside.

Myth: Since you're the one coughing up the cash for the appraisal when applying for your loan to purchase or refinance your house, you own the produced appraisal report.

Fact: Unless a lender releases its interest in the appraisal report, it is legally owned by the lending agency that ordered the appraisal. However, consumers must be given a copy of the report upon written request, because of the Equal Credit Opportunity Act.

Myth: Home buyers need not care about what is in their document so long as it meets the needs of their lending institution.

Fact: Only if home buyers read 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. An appraisal report can double as a record for the future, containing an incredible amount of information - including, but 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 proximity.