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 approximates 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 renders 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 would likely pay a willing seller for a particular property, with neither being affected by undue stimulus. Replacement cost is the dollar amount required to reconstruct a property in-kind.
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 a home inspection, and in no way should be considered as such. 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.
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. However, consumers may request a copy of the appraisal report from the lender, in writing, under the Equal Credit Opportunity Act.
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 but not limited to: location, condition, quality, improvement size, and recent sale prices of comparable properties.
Myth: In a robust economy, when the sale 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 of comparable properties and other relevant considerations. This is true in prosperous times as well as in declining markets.