Myth: Market value will be equivocal to the assessed value of the property.
Reality: While most states uphold the concept that assessed value approximates estimated market value, this generally is not the case.
Interior reconstruction that the assessor has not investigated and a dearth of reassessment on nearby houses are exact examples of why there might be a differential in price.
Myth: Depending on whether the appraisal is drawn up for the buyer or the seller, the value of the home will vary.
Reality: The appraised value of the property does not affect the pay of the appraiser; as a result, the appraiser has no pressured interest in the price of the home. Obviously, he will render services with impartiality and independence regardless of for whom the appraisal is provided.
Myth: Market value will be the same as replacement cost.
Reality: Market value is based on what a willing buyer would likely pay a willing seller for a particular home, with neither being under undue influence to buy or sell.
If the house were rebuilt, the dollar amount necessary to do so would set the replacement cost.
Myth: Appraisers use a formula, such as a certain price per square foot, to conclude the value of a home.
Reality: There are many different formulae that an appraiser will use to make a comprehensive analysis of every factor pertaining to the home, such as the size, location, condition, how close it is to undesirable facilities and the sales prices of recently sold comparable houses.
Myth: When the economy is strong and the sales prices of properties are reported to be increasing by a certain percentage, the other houses in the vicinity can be expected to rise based on that same percentage.
Reality: An increase in value of a certain property is always determined on an individualized basis, factoring in data on comparable properties and other relevant elements.
It makes no difference whether the economy is good or on the decline.
Myth: Just examining what the property looks like on the outside gives a good idea of its value.
Reality: Home value is determined by a multitude of variables, including - but not limited to - area, condition, improvements, amenities, and market trends.
Obviously, none of these things can be found just by viewing the property from the exterior.
Myth: Since you're the one coughing up the cash for the appraisal when applying for the loan to buy or refinance real estate, you own the produced appraisal.
Reality: The appraisal report is, in fact, legally owned by the lending agency - unless the lender "relinquishes its interest" in the document.
By the Equal Credit Opportunity Act, any home buyer requesting a copy of the appraisal report must be given one by their lending agency.
Myth: It doesn't mean anything to consumers what's in the appraisal report so long as it meets the requirements of their lender.
Reality: It is almost imperative for consumers to look at a copy of their appraisal report so that they can double-check the accuracy of the report, in case it's required to question its accuracy. Remember, this is probably the most expensive and important investment a consumer will ever make.
Also, the report makes an excellent record for future reference, filled with 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 proximity.
Myth: The only reason someone would order an appraisal is if a property needs its value estimated in a lender sales transaction.
Reality: Depending upon their qualifications and designations, appraisers can and do perform a multitude of services, including advice for estate planning, dispute resolution, zoning and tax assessment review and cost/benefit analysis.
Myth: An appraisal is no different than a home inspection report.
Reality: Appraisal reports have almost nothing in common with a home inspection report.
The function of an appraisal report is to conclude upon an opinion of market value during the appraisal process and the completion of the appraisal.
The point of a home inspector is to determine the condition of the property and its major components, then compose a report on their conclusions.
