Here are some appraisal Facts:
Assumption: The appraised value of a property will vary, depending upon whether the appraisal is conducted for the buyer or the seller.
Fact: The appraiser has no vested interest in the outcome of the appraisal and should render services with independence, objectivity, and impartiality.
Assumption: Market value should approximate replacement cost.
Fact: 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 to its original functional utility.
Assumption: Assessed value should equate to market value.
Fact: While most states support the concept that assessed value approximates 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.
Assumption: Appraisers use a formula, such as a specific price per square foot, to figure out the value of a home.
Fact: Appraisers make a detailed analysis of all factors pertaining to the value of a home, a few of these would include the location, condition of the property vs. other comparable properties, differences in the size of the lots, proximity to public or private facilities, and recent sale prices of comparable properties in the subject market area that share similar neighborhood amenities.
Assumption: Because consumers pay for appraisals when applying for loans to purchase or refinance real estate, they own their appraisal.
Fact: The appraisal is, in fact, legally owned by the client/lender who ordered the report - unless the client/lender "releases its interest" in the document. However, under the Equal Credit Opportunity Act, if the consumers paid for the appraisal they must receive a copy of the appraisal report from their client/lender who had ordered the report.
Assumption: Appraisers are hired only to estimate real estate property values in property sales involving mortgage-lending transactions.
Fact: 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, PMI removal, and cost/benefit analysis.
Assumption: 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.
Fact: 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.
Assumption: Consumers need not be concerned with what is in the appraisal document so long as it satisfies the needs of their lending institution.
Fact: 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 that includes 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.
Assumption: An appraisal is the same as a home inspection.
Fact: An appraisal does not serve the same purpose as an inspection. The appraiser forms an opinion of value resulting form the appraisal process and then submits a report to the client which in most cases is a lender. A home inspector determines the condition of the home and its major components and reports these findings to their client which in most cases is the buyer.
Assumption: You can find out what a property is worth by looking it up on Zillow or any other automated valuation service.
Fact: Computer derived valuations are rarely accurate as they are based on very limited data.
For reasoning why automated valuations, such as Zillow, should not be relied upon for an accurate valuation of your most valuable investment, just click on the link at the bottom of any of the web pages on our site that reads: "Automated Appraisal Services"