Common myths about appraising

By law, an appraiser must be state-licensed to perform appraisals for federally-related sales. You are also entitled by law to request a copy of the finished appraisal report from your lending agency. Contact our professional staff if you have any concerns about the appraisal process.

Myth: The value that is ascertained by the appraiser must be exactly the same as the market value.

Fact: While most states back the suggestion that assessed value is equal to estimated market value, this usually is not the case. Often when interior remodeling has been done and the assessor is has not investigated the improvement or other houses in the neighborhood have not been reassessed for a good length of time, it may vary wildly.

Myth: Depending on if the appraisal is done for the buyer or the seller, the appraised value of the house will vary.

Fact: There is no personal interest on the part of the appraiser in the outcome of the appraisal, therefore he will complete his work with impartiality and independence, regardless for whom the appraisal is created.

Myth: Market value should equal replacement cost.

Fact: Market value is based on what a willing buyer would be interested in paying a willing seller for a specific home, with neither being under duress to buy or sell. If the house were rebuilt, the dollar amount required to do so would form the replacement cost.

Myth: Certain formulae, like the price per square foot, are the ways appraisers use to arrive at the price of a house.

Fact: There are many numerous processes that an appraiser will use to make a comprehensive investigation of every factor pertaining to the house, such as the size, location, condition, how close it is to specific facilities and the value of recently sold comparable homes.

Myth: In a powerful economy - when the prices of properties in a given area are reported to be appreciating by a particular percentage - the worth of individual houses in the proximity can be expected to increase by that same percentage.

Fact: All increase of worth is on an individual basis, found by information on relevant conditions and the data of comparable properties. It makes no difference if the economy is good or terrible.

Myth: You can usually tell what a property is worth simply by looking at the exterior.

Fact: To find an accurate price beyond all doubt, an appraiser must inspect the home on a variety of factors based on area, condition, improvements, amenities, and market trends. An exterior inspection obviously can't provide all of the data needed.

Myth: Since you're the one funding for the appraisal when applying for the loan to purchase or refinance real estate, you own the ordered appraisal report.

Fact: Legally, the appraisal is owned by the lending agency unless the lender releases their interest in the report. However, consumers have to be supplied with a copy of the appraisal report upon written request, because of the Equal Credit Opportunity Act.

Myth: There's no point for home buyers to even concern themselves with what the appraisal report contains so long as their lending institution is satisfied.

Fact: Only if home buyers examine a copy of their appraisal report can they verify its accuracy and possibly need to question the result. Remember, this is probably the most expensive and important investment a consumer will ever make. An appraisal report can double as a record for the future, as it contains an incredible amount of information - including, but certainly 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 vicinity.