Appraisal myths debunked

By law, an appraiser is required to be state-licensed to offer appraisals for federally-backed purchases. You also have the right to request 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 assessed by the appraiser should be equivalent to the market value.

Fact: It might be that Colorado, like most states, validates the common myth that the assessed value is no different from the market value; however, this is not always true. Usually when interior remodeling has occurred and the assessor is has not investigated the improvement or properties in the area have not been reassessed for quite a while, it may vary wildly.

Myth: Depending on if the appraisal is written for the buyer or the seller, the value of the home will vary.

Fact: The cost of the house does not affect the payment of the appraiser; as such, the appraiser has no personal interest in the value of the home. This means that he will render services with impartiality and independence regardless for whom the appraisal is provided.

Myth: The replacement value of the home should be is on par with the market value.

Fact: The way market value is derived is based on what a buyer would be willing to pay a willing seller for a property without being under duress from any outside party to purchase or sell. The replacement cost is the dollar amount required to reconstruct a house in-kind.

Myth: Appraisers use a formula, such as a certain price per square foot, to come to the cost of a home.

Fact: Appraisers complete a comprehensive analysis of all factors in consideration to the cost of a house, including its location, condition, size, proximity to facilities and recent opinion of value of comparable properties.

Myth: As houses increase their worth by a specific percentage - in a robust economic state - the houses in proximity are figured to appreciate by the same amount.

Fact: Any price at which an appraiser arrives concerning a particular home is always personalized, based on certain factors pulled from the data of comparable houses and other specifications within the home itself. It makes no difference if the economy is strong or terrible.

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Myth: Just examining what the home looks like on its exterior gives a good idea of its cost.

Fact: To conclude an accurate price beyond all doubt, an appraiser must examine the property on a variety of factors based on location, condition, improvements, amenities, and current market trends. As you can see, none of these things can be derived simply by inspecting the property from the outside.

Myth: Because consumers pay for appraisal reports when applying for loans to purchase or refinance their property, they own their appraisal.

Fact: Legally, the appraisal is owned by the lender unless the lender relinquishes their interest in the appraisal. However, consumers have to be given a copy of the report upon written request, because of the Equal Credit Opportunity Act.

Myth: There's no need for consumers to even care about what the appraisal contains so long as their lending institution is satisfied.

Fact: It is almost imperative for home buyers to read a copy of their appraisal report so that they can verify the accuracy of the report, in case they need to question its accuracy. Remember, this is probably the most expensive and important investment a consumer will ever make. Also, the appraisal makes a near perfect record for future reference, containing useful and often-revealing data - 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 vicinity.

Myth: The only reason someone would order an appraisal is if a property needs its price estimated in a lender-based sales transaction.

Fact: Depending upon their qualifications and designations, appraisers can and may provide a lot of different services, including advice for estate planning, dispute resolution, zoning and tax assessment review and cost/benefit analysis.

Myth: A home inspection serves the same purpose as an appraisal.

Fact: A home inspection report has a completely different purpose than an appraisal report. The job of the appraiser is to find an opinion of value in the appraisal process and through writing the report. A home inspector assesses the condition of the house and its main components and reports these findings.