Myth: Appraisers use a series of formulas or predetermined adjustment factors, such as a specific price per square foot, to figure out the value of a home.
Reality: Appraisers make a market supported analysis of major factors pertaining to the value of a home including its location, size, condition, quality and how those compare to the recent sale prices of comparable properties.
Myth: Assessed value should equal market value.
Reality: While many states hold that assessed value approximates estimated market value, often this is not the case. Some examples include when interior remodeling has occurred and the assessor is unaware of the improvements, or when neighborhood properties have not been reassessed after a period of market corrections.
Myth: The appraised value of will vary depending on whether the appraisal is conducted for the buyer or the seller.
Reality: The appraiser cannot have a vested interest in the outcome of the appraisal. It is conducted with independence, objectivity and impartiality – no matter for whom the appraisal is conducted.
Myth: Market value should approximate construction cost.
Reality: Market value is based on what a willing buyer likely would pay a willing seller for a particular property. Replacement (construction) cost is the dollar amount required to reconstruct a property in-kind.
Myth: When the sales price 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 changes of a property must be determined on an individual basis, factoring in data on comparable properties and other relevant considerations.
Myth: You can tell what a property is worth simply by looking at the outside.
Reality: Property value is determined by several factors, including improvements, amenities, condition, location, and market trends.
Myth: Because a borrower pays for the appraisal when applying a loan to purchase or refinance real estate they own their appraisal and the appraiser should provide a copy of the report.
Reality: The appraisal is legally owned by the client who ordered it, in most cases this is the lender. However, borrower must be given a copy of the appraisal report prior to the loan closing, giving them adequate time to review it.
Myth: Borrowers need not be concerned with what is in the appraisal document so long as it satisfies the needs of their lending institution.
Reality: Only if borrowers read a copy of their appraisal can they ensure the accuracy of the result. It is also a valuable record for future reference, containing revealing and useful information such as the physical and legal description of the property, home size measurements and a narrative of current real-estate activity and/or market trends in the vicinity.
Myth: An appraiser is hired only to estimate real estate property values involving mortgage lending transactions.
Myth: An Appraisal is similar to a home inspection.
Reality: The Appraiser forms an opinion of value and reports these findings to the client, typically the lender or property owner. A home inspector determines the condition of the home and reports these findings to the client, typically the buyer or property owner.