Myth: Market value must be the same as the assessed value of the property.
Reality: This usually isn't true; 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 occurred and the assessor has not seen the improvements, or when homes in the vicinity have not been reassessed for an prolonged period.
Myth: Depending on if the appraisal is produced for the buyer or the seller, the value of the property will vary.
Reality: The price of the house does not affect the pay of the appraiser; due to this, the appraiser has no pressured interest in the price of the house. What this means is he will complete his job with impartiality and independence regardless of for whom the appraisal is conducted.
Myth: Market value will mirror replacement cost.
Reality: Without any suggestion from any external parties to buy or sell, market value is what a willing buyer would pay a willing seller for a specific home. If the house were rebuilt, the dollar amount needed to do so would make up the replacement cost.
Myth: Appraisers use a formula, such as a specific price per square foot, to arrive at the value of a property.
Reality: There are many different methods that an appraiser will use to make a detailed investigation of every factor pertaining to the home, such as the size, location, condition, how close it is to certain facilities and the values of recently sold comparable homes.
Myth: In a strong economy - when the sales prices of homes in a given area are found to be rising by a particular percentage - the prices of individual houses in the proximity can be expected to increase by that same percentage.
Reality: An increase in value of a specific property is always concluded on an individualized basis, factoring in data on comparable houses and other relevant considerations. This is true in good economic times as well as bad.
Myth: The house's exterior is determinate of the actual value of the house; it is unnecessary to do an interior appraisal.
Reality: Property value is determined by a number of variables, including location, condition, improvements, amenities, and market trends. As you can see, none of these variables can be found just by examining the home from the exterior.
Myth: Since the consumer is the person who provides the funding to pay for the appraisal report when applying for a loan for any real estate transaction, by law the appraisal is theirs.
Reality: The appraisal is, in fact, legally owned by the lending agency - unless the lender "relinquishes its interest" in the report. However, home buyers have to be provided with a copy of the appraisal upon written request, due to the Equal Credit Opportunity Act.
Myth: Consumers need not worry about what is in their report so long as it satisfies the needs of their lending institution.
Reality: A consumer should definitely look through their report; there might be some questions or some worries with the accuracy of the analysis that must be addressed. Remember, this is probably the most expensive and important investment a consumer will ever make. Also, the appraisal makes an invaluable 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 area.
Myth: There is no reason to order an appraisal unless you are trying to get an assessment of the value of a property during a sales transaction involving a lending institution.
Reality: Ordering an appraisal can fulfill a variety of needs depending on the designations and certifications of the appraiser involved; appraisers can provide a multitude of different services, including benefit/cost analysis, tax assessment, legal dispute resolution, and even estate planning.
Myth: A property inspection serves the same purpose as an appraisal.
Reality: A home inspection serves a completely different purpose than an appraisal. The appraiser finds an opinion of value in the appraisal process and resulting document. House inspectors will produce a report that will explain the condition of the property and its major components and possible damage.
