Appraisal Myths

and Appraisal Realities

Priority Appraisal discusses myths and realities about real estate appraisals and appraisers.

Myth: Assessed value should equate market value.
Reality: It could be that Arizona or California, like most states, supports the idea that the assessed value is the same as the market value; however, this is not always true. Examples include when interior reconstruction has happened and the assessor does not know about the improvements, or when properties in the area have not been reassessed for an prolonged time.

Myth: Depending on if the appraisal is written for the buyer or the seller, the opinion of value of the house will vary.
Reality: The opinion of value of the property does not affect the salary of the appraiser; as such, the appraiser has no vested interest in the price of the property. What this means is he will provide business with impartiality and objectivity regardless of for whom the appraisal is conducted.

Myth: Market value will equal replacement cost.
Reality: The way market value is derived is based on what a home buyer would be willing to pay a willing seller for a property without being under duress from any outside group to purchase or sell. The dollar amount needed to rebuild a house is what forms the replacement cost.

Myth: There are specific methods that appraisers use to find the value of a property, like the price per square foot.
Reality: Appraisers complete a detailed analysis of all factors in consideration to the value of a house, including its location, condition, size, proximity to facilities and recent sale prices of comparable properties.

Myth: As houses increase in value by a specific percentage - in a strong economy - the properties in proximity are figured to increase by the same amount.
Reality: Any value an appraiser derives in regards to a specific home is always personalized, based on certain factors derived from the data of comparable properties and other specifications within the home itself. It doesn't matter if the economy is doing well or declining.

Myth: Just seeing what the property looks like on the outside gives an idea of its value.
Reality: House value is concluded by a number of factors, including - but not limited to - location, condition, improvements, amenities, and market trends. There's no possible way to get all of this data from simply viewing the house from the exterior.

Myth: Considering that the consumer is the one who puts up the money to pay for the appraisal report when applying for a loan for any real estate transaction, legally the appraisal is theirs.
Reality: The report is, in fact, legally owned by the lender - unless the lender "relinquishes its interest" in the appraisal report. However, consumers must be supplied with a copy of the document upon written request, due to the Equal Credit Opportunity Act.

Myth: It doesn't mean anything to consumers what's in the appraisal report so long as it meets the needs of their lending company.
Reality: Only when home buyers examine a copy of their appraisal report can they ensure its accuracy and know if they should ask questions. Remember, this is probably the most expensive and important investment a consumer will ever make. An appraisal report can serve as a record for the future, containing a great deal of 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 vicinity.

Myth: There is no reason to order an appraisal unless you are trying to get an estimate of the value of a property during a sales transaction involving a lending institution.
Reality: Appraisers can have many different qualifications and designations which allow them to provide a variety of different services including - but not limited to - advice on estate planning, tax assessment, zoning, dispute resolution in many different legal situations and cost analysis.

Myth: An appraisal is the same as a home inspection report.
Reality: Appraisal reports have almost nothing in common with a home inspection. The task of the appraiser is to conclude an opinion of value in the appraisal process and through writing the report. The job of a home inspector is to find the condition of the house and its main components, then compose a report on these inspection.