As a seasoned Real Estate Appraiser, I’ve encountered my fair share of misconceptions surrounding my profession and the process of real estate appraisal. To better serve my clientele and potential customers, let me shed some light on these myths and provide you with the reality of our industry.
Myth 1: The assessed value of a property should equal its market value. The truth is, while many states endorse the idea of assessed value aligning with market value, discrepancies can arise. Cases in point include situations where interior upgrades have been made without the assessor’s knowledge or when nearby properties haven’t been reassessed for a prolonged period.
Myth 2: Appraised value fluctuates based on whether the appraisal is for the buyer or the seller. However, the reality is an appraiser’s objective is to deliver services with independence, impartiality, and devoid of vested interests, irrespective of the appraisal’s recipient.
Myth 3: Market value should mirror replacement cost. This is not necessarily accurate, as market value is the amount a willing buyer would likely pay a willing seller, with no undue pressure. Replacement cost, on the other hand, is the monetary amount needed to replicate a property identically.
Myth 4: Appraisers use a specific formula, like price per square foot, to ascertain a home’s value. In reality, appraisers conduct an exhaustive analysis of factors impacting the value of a home. These include location, condition, size, vicinity to facilities, and recent sales prices of comparable properties.
Myth 5: Property value can be determined solely by observing the exterior. This is far from true. Property value is influenced by various factors such as location, condition, improvements, amenities, and prevailing market trends.
Myth 6: Consumers possess the appraisal since they pay for it when applying for loans to purchase or refinance real estate. Legally, the lender owns the appraisal unless they “release its interest” in the document. Nonetheless, under the Equal Credit Opportunity Act, consumers are entitled to a copy of the appraisal report upon written request.
Myth 7: Appraisers are only hired to estimate real estate property values in mortgage-lending transactions. This couldn’t be further from the truth. Appraisers, based on their qualifications and designations, offer diverse services like advice for estate planning, dispute resolution, zoning and tax assessment review, and cost/benefit analysis.
Myth 8: An Appraisal and a home inspection serve the same purpose. Contrarily, an Appraisal establishes an opinion of value in the process and resulting report, while a home inspector assesses the home’s condition and its significant components, reporting these findings.