Appraisal myths debunked

Legally, a real estate appraiser needs to be state certified to write legitimate appraisal reports for federally-related transactions. You are also entitled by law to demand a copy of the completed appraisal from your lending agency. Contact our professional staff if you have any questions about the appraisal process.

Myth: The value that is assessed by the appraiser must be equivalent to the market value.

Fact: While most states support the concept that assessed value equates estimated market value, this often is not the case. Examples include when interior reconstruction has happened and the assessor does not know about the improvements, or when homes in the vicinity have not been reassessed for an extended time.

Myth: Depending on if the appraisal is ordered for the buyer or the seller, the appraised value of the house will vary.

Fact: The appraiser has no personal interest in the result of the appraisal report and should conduct his job with independence, objectivity and impartiality - no matter for whom the appraisal is written.

Myth: Any time market value is found, it should be similar to the replacement cost of the property.

Fact: Market value is derived from what a willing buyer would be interested in paying a willing seller for a particular property, with neither being under duress to buy or sell. The replacement cost is the dollar amount necessary to rebuild a house in-kind.

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

Fact: Appraisers complete an exhaustive analysis of all factors in consideration to the cost of a home, including its location, condition, size, proximity to facilities and recent values of comparable houses.

Myth: As properties increase their worth by a specific percentage - in a robust economic state - the houses nearby are expected to increase by the same amount.

Fact: Price increase of a certain home must be determined on an individualized basis, factoring in information on comparable houses and other relevant considerations. It doesn't matter if the economy is on the rise or declining.

Myth: Just examining what the property looks like on the outside gives an excellent idea of its cost.

Fact: There are a number of different variables that show property value; these factors include location, condition, improvements, amenities, and market trends. An external inspection certainly can't provide all of the data necessary.

Myth: Because the consumer is the one who provides the funding to pay for the appraisal when applying for a loan for any real estate transaction, legally the appraisal report is theirs.

Fact: Unless a lender releases its interest in the appraisal report, it is legally owned by the lending company that purchased the appraisal. Because of the Equal Credit Opportunity Act, any consumer asking for a copy of the report must be provided with it by their lender.

Myth: There's no reason for consumers to even care about what the appraisal report contains so long as their lender is satisfied.

Fact: Only if home buyers examine a copy of their appraisal 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. Also, the appraisal makes an excellent record for future reference, filled with helpful and often-revealing 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 area.