Appraisal myths & facts

By law, an appraiser must be state-licensed to produce appraisals for federally-backed purchases. You are also entitled by law to receive a copy of the completed appraisal report from your lending agency. Contact us if you have any concerns about the appraisal process.

Myth: The value that is ascertained by the appraiser is required to 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. Examples include when interior remodeling has occurred and the assessor is unaware of the improvements, or when properties in the area have not been reassessed for an extended time.

Myth: Depending on if the appraisal is done for the buyer or the seller, the opinion of value of the property will vary.

Fact: The appraiser has no vested interest in the result of the report and should conduct his job with independence, objectivity and impartiality - no matter for whom the appraisal is written.

Myth: The replacement value of the house will be is on par with the market value.

Fact: The way market value is derived is based on what a home buyer would be willing to pay a willing seller for a house without being under pressure from any external party to purchase or sell. Replacement cost is the dollar amount necessary to rebuild a property in-kind.

Myth: Appraisers use a formula, like a specific price per square foot, to arrive at the worth of a home.

Fact: Appraisers complete a full analysis of all factors in consideration to the cost of a house, including its location, condition, size, proximity to facilities and recent values of comparable homes.

Myth: In a robust economy - when the sales prices of houses in a given region are found to be increasing by a particular percentage - the values of individual properties in the proximity can be expected to appreciate by that same percentage.

Fact: Any price at which an appraiser arrives in regards to a specific home is always individualized, based on certain factors concluded from the data of comparable houses and other specifications within the property itself. It doesn't matter if the economy is doing well or declining.

Myth: You can usually see what a house is worth simply by looking at the exterior.

Fact: To conclude an accurate worth beyond all doubt, an appraiser must examine the home on a variety of factors based on location, condition, improvements, amenities, and market trends. Obviously, none of these variables can be found simply by examining the home from the outside.

Myth: Since you're the one providing the money for the appraisal report when applying for the loan to purchase or refinance real estate, you own the ordered appraisal.

Fact: Legally, the document is owned by the lending agency unless the lender releases their interest in the report. Because of the Equal Credit Opportunity Act, any consumer demanding a copy of the report must be given it by their lending agency.

Myth: There's no reason for consumers to even worry about what the appraisal contains so long as their lender is fine with the contents therein.

Fact: A home buyer should definitely inspect their appraisal report; there might be some questions or some concerns with the accuracy of the report that must be addressed. Remember, this is probably the most expensive and important investment a consumer will ever make. An appraisal can double 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 area.