Some Myths and Realities About
Real Estate Appraisals and Appraisers
Myth: Assessed value should
always equate the market value.
Reality: While most states support the concept that assessed
value approximate estimated market value, this often is not the
case. In California under prop.13 a property is usually reassessed
when it sells or has certain other improvements
Myth: The appraised value of a property will vary, depending
upon whether the appraisal is conducted for the buyer or the seller.
Reality: The appraiser has no vested interest in the outcome
of the appraisal and should render services with independence,
objectivity and impartiality - no matter for whom the appraisal is
Myth: Market value should approximate replacement cost.
Reality: Market value is based on what a willing buyer likely
would 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.
Myth: Appraisers use a formula, such as a specific price per
square foot, to figure out the value of a home.
Reality: 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. A straight price per square foot appraisal would be very
deceiving as it cannot account for the individual attributes of the
Myth: 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.
Reality: 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.
Myth: You generally can tell what a property is worth simply
by looking at the outside.
Reality: Property value is determined by a number of factors,
including location, condition, improvements, amenities, and market
trends. A much more accurate appraisal is given the more information
an appraiser has, so an exterior appraisal can be performed
depending on the level of need; but an interior inspection adds
confidence and accuracy to the report.
Myth: Because consumers pay for appraisals when applying for
loans to purchase or refinance real estate, they own their
Reality: The appraisal is, in fact, legally owned by the
lender; however, consumers must be given a copy of the appraisal
report, upon written request, under the Equal Credit Opportunity
Myth: Consumers need not be
concerned with what is in the appraisal document so long as it
satisfies the needs of their lending institution.
Reality: Only if consumers read a copy of their appraisal can
they double-check its accuracy and question the result. Also, 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, list of
comparable properties in the neighborhood, neighborhood description
and a narrative of current real-estate activity and/or market trends
in the vicinity.
Myth: Appraisers are hired only to estimate real estate
property values in property sales involving mortgage-lending
Reality: Depending upon their qualifications and
designations, appraisers can and do provide a variety of services,
including advice for estate planning, marriage dissolution,
bankruptcy, dispute resolution, zoning and tax assessment review and
Myth: An Appraisal is the same as a home inspection.
Reality: 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
Myth: an Appraisal is an Appraisal and I should be allowed to
take it to any lender I decide to go through.
Reality: The truth is that under the USPAP laws the
transferring of appraisals is not legal.
It violates the ethics and confidentiality rules.
Myth: predatory lending happens to poor people or uneducated
Reality: this is not true; it can happen to anybody and the
best way to fight it is knowledge. This website provides information
and hints on how to detect it and fight it. http://realtytimes.com/rtnews/rtcpages/20000911_predatory1.htm
Myth: My real estate agent can give me a value for my
property; why do I need an appraisal by a licensed appraiser?
Reality: While most agents are very good at giving you a
value keep in mind they want your listing which may skew their view
on your house. An appraiser is an unbiased opinion that has no stake
in the outcome and therefore can be fair to all.
Myth: My agent says that I should get an appraisal prior to
listing the house; I think he is just lazy.
Reality: Your agent is wise for a couple of reasons. One a
house with a proven value by a licensed appraiser is easier to sell.
Two many lawsuits come from misleading information from the seller
such as living area and lot sizes. An appraiser will accurately
measure the house as part of the report and provide a plat map that
shows the lot size. We offer pre-listing appraisals and sketch
reports for such reasons.