Appraisal myths debunked
By law, an appraiser needs to be state-licensed to produce appraisals for federally-related purchases. You have the ability to acquire a copy of the finished report from your lender. Contact us if you have any concerns about the appraisal process.
Myth: Market value has to be the same as the assessed value of the property.
Fact: It is probable that California, like most states, supports the common myth that the assessed value is no different from the market value; however, this is not always true. Examples include when interior remodeling has happened and the assessor has not seen the improvements, or when houses in the vicinity have not been reassessed for an prolonged period of time.
Myth: The opinion of value of a house will vary depending upon if the appraisal is provided for the buyer or the seller.
Fact: The appraiser has no personal interest in the outcome of the report and should conduct his task with independence, objectivity and impartiality - no matter for whom the appraisal is written.
Myth: Any time market value is established, it should equate to the replacement cost of the house.
Fact: Market value is acquired by what a willing buyer would be interested in paying a willing seller for a particular home, with neither being under undue influence to buy or sell. If the property were rebuilt, the dollar amount required to do so would form the replacement cost.
Myth: Specific formulae, such as the price per square foot of the property, are the methods appraisers use to come to the value of a home.
Fact: There are many different calculations that an appraiser will use to make a comprehensive analysis of every factor pertaining to the house, such as the size, location, condition, how close it is to certain facilities and the value of recently sold comparable houses.
Myth: As properties appreciate by a specific percentage - in a strong economic state - the properties nearby are expected to increase by the same amount.
Fact: Any value at which an appraiser arrives concerning a particular house is always individualized, based on certain factors pulled from the information of comparable houses and other considerations within the property itself. It makes no difference if the economy is excellent or bad.
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Myth: You can generally find what a property is worth simply by looking at the exterior.
Fact: To determine an accurate value beyond all doubt, an appraiser must examine the home on a variety of factors based on location, condition, improvements, amenities, and current market trends. An exterior inspection definitely can't provide all of the data required.
Myth: Because consumers pay for the appraisal when applying for loans to purchase or refinance their house, they legally own their appraisal report.
Fact: Legally, the appraisal is owned by the lending company unless the lender releases their interest in the appraisal. However, consumers have to be given a copy of the report upon written request, under the Equal Credit Opportunity Act.
Myth: Home buyers need not care about what is in their report so long as it meets the needs of their lending agency.
Fact: Only if consumers look through 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. Also, the report makes an invaluable record for future reference, comprised of 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.
Myth: There is no reason to order an appraisal unless you are trying to get an estimate of the cost of a property during a sales transaction involving a lender.
Fact: Ordering an appraisal can fulfill a variety of requirements depending on the designations and certifications of the appraiser involved; appraisers can perform a multitude of different services, including benefit/cost analysis, tax assessment, legal dispute resolution, and even estate planning.
Myth: An appraisal is the same as a home inspection.
Fact: An appraisal does not serve the same purpose as an inspection report. The point of an appraisal is to find an opinion of fair market value during the appraisal process and the completion of the appraisal. A home inspector analyzes the condition of the house and its main components and reports their findings.
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