Myths and Realities About
Real Estate Appraisals and Appraisers:
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.
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
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
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.
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.
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.
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.
Consumers need not be concerned with what is in the appraisal
document so long as it satisfies the needs of their lending
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.
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.
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.