SOME MYTHS AND REALITIES ABOUT

REAL ESTATE APPRAISALS AND APPRAISERS

 

Myth: Assessed value should equate to market value.

Reality: While most states support the concept that assessed value approximate

estimated market value, this often is not the case. Examples include when

interior remodeling has occurred and the assessor is unaware of the

improvements, or when properties in the vicinity have not been reassessed

for an extended period.

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 conducted.

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: 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.

 

Myth: Because consumers pay for appraisals when applying for loans to purchase

or refinance real estate, they own their appraisal.

Reality: The appraisal is, in fact, legally owned by the lender – unless the lender

“releases its interest” in the document. However, consumers must be given

a copy of the appraisal report, upon written request, under the Equal Credit

Opportunity Act.

 

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 transactions.

Reality: Depending upon their qualifications and designations, appraisers can and

do provide a variety of services, including advice for estate planning,

dispute resolution, zoning and tax assessment review and cost/benefit

analysis.

 

Myth: Because Appraisal Institute-designated members must exceed to higher

levels of experience and education than appraisers who are merely state

licensed or certified, they charge a premium for their services.

Reality: In today’s competitive market, appraisal fees for residential properties are

likely to be comparable.