APPRAISAL
FACTS AND COMMON MISCONCEPTIONS
MISCONSEPTION: The appraised value of a property will
vary depending upon whether the appraisal is conducted for the buyer or
the seller.
FACT: The appraiser has no vested interest in the outcome
of the appraisal and should render services with independence,
objectivity and impartiality.
MISCONSEPTION: Appraisers are hired only to estimate real
estate property values in property sales involving mortgage-lending
transactions.
FACT: Depending upon their qualifications and
designations, appraisers offer a variety of services, including advice
for estate planning, dispute resolution, zoning and tax assessment
review and cost/benefit analysis.
MISCONSEPTION: Market value should approximate
replacement cost.
FACT: Market value is based on what a willing buyer would
likely pay a willing seller for a particular property, with neither
being under pressure to buy or sell. Replacement cost is the dollar
amount required to reconstruct a property in-kind.
MISCONSEPTION: Assessed value should equate to market
value.
FACT: While most states support the concept that assessed
value approximates estimated market value, this is often not the case.
Examples include when interior remodeling has occurred and the assessor
is unaware of the improvements, or when properties in the vicinity have
not been reassessed for an extended period of time.
MISCONSEPTION: Appraisers use a formula, such as a
specific price per square foot, to figure the value of a home.
FACT: Appraisers make a detailed analysis of all factors
pertaining to the value of a home including its location, condition,
size, proximity to facilities and recent sale prices of comparable
properties in the subject market area.
MISCONSEPTION: Because consumers pay for appraisals when
applying for loans to purchase or refinance real estate, they own their
appraisal.
FACT: The appraisal is, in fact, legally owned by the
lender - unless the lender "releases its interest" in the document.
However, consumers may obtain a copy of the appraisal report from the
lender who ordered it, under the Equal Credit Opportunity Act.
MISCONSEPTION: In a robust economy - when the sales
prices 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.
FACT: Value appreciation of a specific property must be
determined on an individualized basis, factoring in data on comparable
properties and other relevant considerations. This is true in good
times as well as bad.
MISCONCEPTION: An appraisal document and a home inspection
document are interchangeable.
FACT: An appraisal does not serve the same purpose as an
inspection. The appraiser forms an opinion of value in the appraisal
process and resulting report. A home inspector determines the condition
of the home and its major components and reports these findings.
MISCONSEPTION: Consumers need not be concerned with what
is in the appraisal document so long as it satisfies the needs of their
lending institution.
FACT: Only if consumers read a copy of their appraisal
can they double-check its accuracy and question the result. In
addition, it makes a valuable record for future reference containing
useful and often revealing information, including the legal and
physical description of the property, square footage measurements, a
list of comparable properties in the neighborhood, neighborhood
description, and a narrative of current real estate activity and/or
market trends in the vicinity.
MISCONSEPTION: you generally can tell what a property is
worth simply by looking at the outside.
FACT: Property value is not determined by the physical
structure alone, but is a compilation of factors including location,
condition, improvements, amenities, and market trends.