Appraisal myths & facts
By law, an appraiser must be state-licensed to produce appraisals for federally-related purchases. Also by law, you have the right to receive a copy of the completed report from your lending agency. Contact our professional staff if you have any concerns about the appraisal process.
Myth: Assessed value should be similar to to market value.
Fact: It is possible that California, like most states, validates the suggestion that the assessed value equals the market value; however, this is not often the case. Interior reconstruction that the assessor is not aware of and a lack of reassessment on nearby properties are perfect examples of why there might be a differential in price.
Myth: Depending on if the appraisal is produced for the buyer or the seller, the cost of the property will vary.
Fact: The appraiser has no vested interest in the outcome of the appraisal report and should render services with independence, objectivity and impartiality - no matter for whom the appraisal is provided.
Myth: The replacement cost of the home will be is on par with the market value.
Fact: Market value is arrived at through what a willing buyer would likely pay a willing seller for a certain house, with neither being under duress to buy or sell. The dollar amount required to reconstruct a home is what forms the replacement cost.
Myth: Appraisers use a formula, such as a specific price per square foot, to arrive at the worth of a property.
Fact: There are many varied calculations that an appraiser will use to make an in-depth investigation of every factor pertaining to the property, such as the size, location, condition, how close it is to undesirable facilities and the value of recently sold comparable properties.
Myth: As homes appreciate by a certain percentage - in a strong economy - the properties in proximity are expected to appreciate by the same amount.
Fact: Any value at which an appraiser concludes concerning a certain property is always personalized, based on certain factors found from the information of comparable homes and other specifications within the property itself. This is true in good economic times as well as bad.
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Myth: Just looking at what the property looks like on the outside gives an excellent idea of its worth.
Fact: To find an accurate price beyond all doubt, an appraiser must examine the property on a variety of factors based on location, condition, improvements, amenities, and market trends. Obviously, none of these variables can be derived just by inspecting the property from the outside.
Myth: Because consumers fund appraisal reports when applying for loans to purchase or refinance their home, they own their appraisal report.
Fact: The document is, in fact, legally owned by the lender - unless the lender "releases its interest" in the document. Under the Equal Credit Opportunity Act, any consumer demanding a copy of the report must be provided with it by their lender.
Myth: There's no point for consumers to even concern themselves with what the report contains so long as their lending institution is satisfied.
Fact: It is almost imperative for consumers to read a copy of their appraisal so that they can verify the accuracy of the document, in case it's required to question its accuracy. Remember, this is probably the most expensive and important investment a consumer will ever make. There is an incredible amount of information contained in an appraisal report that will probably be useful to the consumer in the future, such as 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 region.
Myth: The only reason someone would hire an appraiser is if a home needs its worth estimated in a lender sales transaction.
Fact: Ordering an appraisal can fulfill a variety of necessities depending on the designations and certifications of the appraiser involved; appraisers can provide a great deal of different services, including benefit/cost analysis, tax assessment, legal dispute resolution, and even estate planning.
Myth: You don't need to get an appraisal if you get a home inspection.
Fact: An appraisal does not serve the same purpose as an inspection. The point of an appraisal is to arrive at an opinion of fair market value during the appraisal process and the production of the report. A home inspector analyzes the condition of the house and its main components and reports their findings.