Common myths about appraising
By law, an appraiser is required to be state-licensed to produce appraisals for federally-supported purchases. Also by law, you have the right to demand a copy of the finished appraisal report from your lending agency. Contact The Appraisal Firm if you have any concerns about the appraisal process.
Myth: The value that is assessed by the appraiser will be exactly the same as the market value.
Fact: It could be that California, like most states, supports the idea that the assessed value is no different from the market value; however, this is sometimes the exception rather than the rule. Examples include when interior remodeling has occurred and the assessor is unaware of the improvements, or when homes in the vicinity have not been reassessed for an prolonged time.
Myth: Depending on whether the appraisal is provided for the buyer or the seller, the cost of the property will vary.
Fact: There is no vested interest on the part of the appraiser in the outcome of the appraisal report, therefore he will complete his work with impartiality and independence, no matter for whom the appraisal is ordered.
Myth: Market value will equate to replacement cost.
Fact: The way market value is found is based on what a buyer would be willing to pay a willing seller for a house without being under pressure from any external party to buy or sell. If the house were reconstructed, the dollar amount required to do so would make up the replacement cost.
Myth: Certain methods, such as the price per square foot of the property, are what appraisers use to determine the cost of a house.
Fact: Appraisers complete a full analysis of all factors pertaining to the value of a home, including its location, condition, size, proximity to facilities and recent values of comparable houses.
Myth: As properties increase their worth by a specific percentage - in a robust economic state - the properties nearby are expected to appreciate by the same amount.
Fact: Cost increase of a specific property is always concluded on an individualized basis, factoring in information on comparable houses and other relevant specifications within the home itself. It doesn't matter if the economy is doing well or declining.
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Myth: Just examining what the home looks like on its exterior gives an excellent idea of its cost.
Fact: To find an accurate price beyond all doubt, an appraiser must examine the property on a variety of factors based on area, condition, improvements, amenities, and current market trends. An exterior inspection obviously can't provide all of the data necessary.
Myth: Since you're the one funding for the appraisal report when applying for the loan to purchase or refinance real estate, you own the produced appraisal.
Fact: Legally, the appraisal report is owned by the lending company unless the lender releases their interest in the document. Under the Equal Credit Opportunity Act, any consumer demanding a copy of the document must be given it by their lending agency.
Myth: There's no point for home buyers to even concern themselves with what the appraisal contains so long as their lender is fine with the contents therein.
Fact: A consumer should definitely inspect their document; there might be some questions or some worries with the accuracy of the inspection that should be addressed. Remember, this is probably the most expensive and important investment a consumer will ever make. An appraisal report can serve as a record for the future, containing a great deal of data - 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 area.
Myth: The only reason someone would hire an appraiser is if a property needs its cost assessed in a lender-based sales transaction.
Fact: Depending upon their qualifications and designations, appraisers can and will provide a multitude of different 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.
Fact: A home inspection report serves a completely different purpose than an appraisal. The appraiser concludes on an opinion of value in the appraisal process and resulting appraisal report. House inspectors will produce a report that will show the condition of the property and its major components and possible damage.