Appraisal myths & facts

By law, an appraiser must be state-licensed to offer appraisals for federally-backed transactions. Also by law, you are allowed to receive a copy of the completed appraisal report from your lending agency. Contact Integrated Assets if you have any concerns about the appraisal process.

Myth: The value that is ascertained by the appraiser should be the same as the 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. Generally when interior remodeling has been done and the assessor is unaware of the improvement or other homes in the area have not been reassessed for quite some time, it may vary wildly.

Myth: The buyer or the seller may have impact in the value of the home depending upon for whom the appraiser is working.

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

Myth: Market value should approximate replacement cost.

Fact: Market value is derived from what a willing buyer would likely pay a willing seller for a certain property, with neither being under pressure to buy or sell. If the property were reconstructed, the dollar amount required to do so would form the replacement cost.

Myth: Appraisers use a formula, like a specific price per square foot, to come to the value of a house.

Fact: Appraisers make an exhaustive analysis of all factors in consideration to the cost of a property, including its location, condition, size, proximity to facilities and recent costs of comparable houses.

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

Fact: Price increase of a certain house is always determined on an individualized basis, factoring in data on comparable properties and other relevant considerations. This is true in excellent economic times as well as bad.

Myth: Just seeing what the house looks like on the outside gives an 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 location, condition, improvements, amenities, and current market trends. An external inspection certainly can't provide all of the information required.

Myth: Since you're the one coughing up the cash for the appraisal when applying for your loan to purchase or refinance real estate, you own the provided appraisal report.

Fact: Unless a lender releases its interest in the document, it is legally owned by the lending agency that purchased the appraisal. However, home buyers must be provided with a copy of the document upon written request, due to the Equal Credit Opportunity Act.

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

Fact: A consumer should definitely inspect their report; there will probably be some questions or some worries about the accuracy of the report that should be addressed. Remember, this is probably the most expensive and important investment a consumer will ever make. Also, the appraisal report makes an excellent record for future reference, containing helpful and often-revealing data - 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 proximity.