Appraisal myths & facts
It is enforced by legal agencies that a real estate appraiser needs to be state-licensed to produce appraisals for federally-related home transactions in California. You are also entitled by law to acquire a copy of the finished appraisal report from your lending agency. Contact us if you have any concerns about the appraisal procedure.
Myth: The value that is assessed by the appraiser will be exactly the same as the market value.
Fact: While most states back the suggestion that assessed value is the same as estimated market value, this commonly is not the case. At times when interior remodeling has occurred and the assessor is not aware of the improvement or properties in the area have not been reassessed for years or more, it may vary wildly.
Myth: Depending on if the appraisal is produced for the buyer or the seller, the cost of the home will vary.
Fact: There is no vested interest on the part of the appraiser in the outcome of the report, therefore he will complete his work with impartiality and independence, no matter for whom the appraisal is written.
Myth: Market value should equate to replacement cost.
Fact: The way market value is derived is based on what a home buyer would likely pay a willing seller for a house without being under pressure from any outside party to purchase or sell. The replacement cost is the dollar amount needed to rebuild a property in-kind.
Myth: Specific formulae, like the price per square foot, are what appraisers use to come to the worth of a property.
Fact: Appraisers make a detailed analysis of all factors pertaining to the price of a property, including its location, condition, size, proximity to facilities and recent values of comparable properties.
Myth: In a strong economy - when the sales prices of homes in a given region are found to be increasing by a particular percentage - the costs of individual properties in the vicinity can be expected to appreciate by that same percentage.
Fact: Price increase of a certain property must be concluded on a case-by-case basis, factoring in data on comparable properties and other relevant elements. This is true in strong economic times as well as poor.
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Myth: Just examining what the home looks like on its exterior gives an idea of its cost.
Fact: There are a number of different variables that conclude property value; these factors include area, condition, improvements, amenities, and market trends. There's no real way to get all of this data from just looking at the property from the outside.
Myth: Since you're the one paying for the appraisal report when applying for the loan to buy or refinance your house, you own the produced appraisal.
Fact: The report is, in fact, legally owned by the lending agency - unless the lender "releases its interest" in the report. However, consumers have to be given a copy of the document upon written request, under the Equal Credit Opportunity Act.
Myth: It doesn't matter to consumers what's in the appraisal report so long as it meets the requirements of their lender.
Fact: Only if consumers examine a copy of their appraisal report can they double-check 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 a great deal 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.
Myth: There is no reason to hire an appraiser unless you are trying to get an assessment of the price of a house during a sales transaction involving a lending institution.
Fact: Appraisers can have many different qualifications and designations which allow them to perform a variety of different services including - but definitely not limited to - advice on estate planning, tax assessment, zoning, dispute resolution in many different legal situations and cost analysis.
Myth: A home inspection serves the same purpose as an appraisal.
Fact: Appraisal reports have almost nothing in common with a home inspection. The point of an appraisal is to arrive at an opinion of fair market value during the appraisal process and the completion of the appraisal report. House inspectors will produce a report that will express the condition of the home and its major components and possible damage.