Appraisal myths & facts

It is enforced by law that a real estate appraiser is required to be state-licensed to write appraisal reports for federally-supported real estate purchases in Colorado. You are also entitled by law to acquire a copy of the finished appraisal from your lender. Contact us if you have any concerns about the appraisal process.

Myth: Assessed value will always equate to market value.

Fact: While most states uphold the concept that assessed value approximates estimated market value, this commonly is not the case. Examples include when interior remodeling has occurred and the assessor has not seen the improvements, or when houses in the vicinity have not been reassessed for an extended period.

Myth: The buyer or the seller sometimes may have some pull in the cost of the property depending upon for whom the appraiser is working.

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

Myth: Any time market value is found, it should equal the replacement cost of the home.

Fact: Without any suggestion from any external parties to purchase or sell, market value is what a willing buyer would pay an interested seller for a specific home. Replacement value is the dollar amount needed to reconstruct a home in-kind.

Myth: Certain methods, such as the price per square foot, are the ways appraisers use to come to the price of a house.

Fact: There are many different calculations that an appraiser will use to make a comprehensive investigation of every factor in consideration of the home, such as the size, location, condition, how close it is to certain facilities and the sales price of recently sold comparable properties.

Myth: When the economy is strong and the sales prices of homes are reported to be increasing by a certain percentage, the other houses in the vicinity can be expected to increase based on that same percentage.

Fact: Value increase of a specific property has to be determined on an individualized basis, factoring in information on comparable properties and other relevant specifications within the property itself. It makes no difference if the economy is strong or terrible.

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Myth: The property's exterior is determinate of the actual worth of the house; it is unnecessary to do an interior appraisal.

Fact: There are a number of different factors that show property value; these factors include location, condition, improvements, amenities, and market trends. There's no possible way to get all of this information from simply examining 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 report.

Fact: Unless a lender releases its interest in the document, it is legally owned by the lending agency that purchased the appraisal. Home buyers have to be given a copy of the document through request as per the Equal Credit Opportunity Act.

Myth: It doesn't concern consumers what's in the appraisal report so long as it meets the requirements of their lender.

Fact: Only if consumers check out a copy of their appraisal can they ensure its accuracy and possibly need to question the result. Remember, this is probably the most expensive and important investment a consumer will ever make. There is an incredible amount of information stored in an report that could be useful to the home buyer in the future, such as 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.

Myth: The only reason someone would hire an appraiser is if a home needs its price assessed in a lender-based sales transaction.

Fact: Hiring an appraiser can fulfill a variety of necessities depending on the designations and certifications of the appraiser involved; appraisers can perform a variety of different services, including benefit/cost analysis, tax assessment, legal dispute resolution, and even estate planning.

Myth: You shouldn't need to get an appraisal if you order a home inspection.

Fact: A home inspection serves a completely different purpose than an appraisal report. The purpose of the appraiser is to conclude an opinion of value in the appraisal process and through producing the report. A home inspector analyzes the condition of the building and its main components and reports their findings.