Appraisal Myths
Some Myths and Realities About
Real Estate Appraisals and Appraisers
Myth:Assessed value and market value are
approximately equal.
Reality:Market value is a measure of the
value a consumer (willing buyer) places on a property. While this is often
nearly the same as market value there are situations where they can differ.
A home that has undergone extensive interior remodeling or a specific type
of home that is highly sought after can demand a premium in the market. A
non-traditional home type such as a log home in a group of colonials may
result in differences.
Myth: The appraised value of a property
depends upon whether the appraisal is contracted for the buyer or the
seller.
Reality: One of the primary reasons for
engaging the services of a professional real estate appraiser is that they
have no vested interest in the outcome of the appraised value. Appraisers
should render services with independence, objectivity and impartiality - no
matter for whom the appraisal is conducted.
Myth: Market value should approximate
replacement cost.
Reality: Replacement cost is the cost
required to reconstruct a similar property. It may or may not be an exact
duplicate. 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.
Myth: Appraisers use a formula, such as a
specific price per square foot, to figure out the value of a home.
Reality: Professional real estate appraiser
conduct a detail analysis of the property and use many factors including
location, size, condition, market conditions, appeal, proximity to
services, recent sales of like or comparable properties, etc. to make a
decision of value.
Myth: In a given area most homes will
increase in value by the same percentage.
Reality: Value appreciation of a specific
property is determined by the market appeal for that type of property.
Property size, location, cost and other basic factors all work in harmony
to determine the value of a specific property at a given time.
Myth: You can tell what a property is worth
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 the buyer/seller pays for the
appraisal they own the appraisal.
Reality: The appraisal is, in fact, legally
owned by the lender. The appraiser, in conducting the assignment is working
for the lender. Unless the lender "releases its interest" in the
document the appraiser only provides the document to the lender. 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 as long as it meets the needs of the
current transaction.
Reality: The appraisal and subsequent sale
of a specific property can impact both current market value as well as long
term value for an area. Appraisals should be read by the consumer to verify
their accuracy and to make sure they reflect the items of value. While the
consumer may or may not agree with the actual value it is important that
the appraisal represent the physical characteristics of the property. These
documents also are informative by showing comparable property values,
determining improvements that might add value in the neighborhood and
provide a trend for what is happening to home prices in the area.
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: An Appraisal is the same as a home
inspection.
Reality: An appraisal does not serve the
same purpose as an inspection. The home inspector determines the condition
of the home and its major components. This report is used to make sure
everything is in sound working order for the buyer. The appraisal is an
opinion of value based upon the current condition of the property as
compared to similar properties in the area and market conditions.
Big Sky Appraisals | 20459
Oatlands Chase Place
Leesburg, Virgina 20175 | Phone: 703-737-0042
Fax: 703-737-0003 | bigskyappraisals@verizon.net
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