Appraisal myths & facts

By law, an appraiser is required to be state-licensed to perform appraisals for federally-related sales. Also by law, you are entitled to demand a copy of the finished report from your lender. Contact our professional staff if you have any questions about the appraisal process.

Myth: Assessed value should be equal to market value.

Fact: This is not often the case; most states do support the concept that the assessed value is the same as market value, but not always. Examples include when interior remodeling has happened and the assessor does not know about the improvements, or when houses in the area have not been reassessed for an extended period of time.

Myth: The buyer or the seller will have some pull in the cost of the property depending upon for whom the appraiser is working.

Fact: The appraiser has no personal interest in the result of the appraisal and should complete his task with independence, objectivity and impartiality - no matter for whom the appraisal is conducted.

Myth: Market value will approximate replacement cost.

Fact: Without any influence from any outside parties to buy or sell, market value is what a willing buyer would pay an interested seller for a specific house. If the house were rebuilt, the dollar amount required to do so would make up the replacement cost.

Myth: Specific formulae, like the price per square foot of the property, are what appraisers use to come to the worth of a house.

Fact: Appraisers make a full analysis of all factors pertaining to the worth of a house, including its location, condition, size, proximity to facilities and recent values of comparable houses.  Price per square foot is a term that Realtors often use, however there are a great number of factors that influence that number and they are not typically employed by appraisers to determine the market value of a property.

Myth: In a powerful economy - when the costs of properties in a given neighborhood are found to be rising by a certain percentage - the costs of individual properties in the proximity can be expected to rise by that same percentage.

Fact: Price increase of a certain house is always concluded on a case-by-case basis, factoring in information on comparable homes and other relevant considerations. It makes no difference if the economy is strong or poor.

Myth: Just seeing what the property looks like on its exterior gives an excellent idea of its cost.

Fact: To conclude an accurate value beyond all doubt, an appraiser must examine the house on a variety of factors based on area, condition, improvements, amenities, and market trends. As you can see, none of these variables can be found just by looking at the home from the outside.

Myth: Because the consumer is the party who puts up the capital to pay for the appraisal when applying for a loan for any real estate transaction, by law the appraisal belongs to them.

Fact: The report is, in fact, legally owned by the lending agency - unless the lender "relinquishes its interest" in the appraisal. Home buyers have to be supplied with a copy of the document upon written request because of the Equal Credit Opportunity Act.

Myth: It doesn't matter to consumers what's in the appraisal report so long as it satisfies the needs of their lending agency.

Fact: It is a very good idea for consumers to peruse a copy of their report so that they can verify the accuracy of the document, in case they need to question its accuracy. Remember, this is probably the most expensive and important investment a consumer will ever make. Also, the appraisal report makes a valuable record for future reference, comprised of useful and often-revealing information - 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 proximity.