Myth: Assessed value should equate to market value.
Reality: While most states support the concept that assessed value approximate 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.
Myth: The appraised value of a property will vary, depending upon whether the appraisal is conducted for the buyer or the seller.
Reality: The appraiser has no vested interest in the outcome of the appraisal and should render services with independence, objectivity and impartiality - no matter for whom the appraisal is conducted.
Myth: Market value should approximate replacement cost.
Reality: 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 in-kind.
Myth: Appraisers use a formula, such as a specific price per square foot, to figure out the value of a home.
Reality: Buyer/Seller Beware: If an agent, seller, or appraiser approaches you with a cost per square foot valuation technique, you should be very careful. For example; if they tell you your neighbors house sold for 100K and that it is 1000 square feet in size, logic tells you that that the cost per square foot is $100.00. This oversimplified technique does not take into consideration many other important factors to valuation, such as lot size, view, amenities, condition, location, proximity to schools, facilities, and recreation, etc. Quality Appraisers make a detailed analysis of all factors pertaining to the value of a home, not just the obvious.
Myth: 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.
Reality: 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.
Myth: You generally can tell what a property is worth simply by looking at the outside.
Reality: Property value is estimated by examining a number of factors, including location, condition, improvements, amenities, and market trends.
Myth: Because consumers pay for appraisals when applying for loans to purchase or refinance real estate, they own their appraisal.
Reality: As a result of the Gramm-Leach-Bliley Act, this is now a myth. Although a borrower may have paid a fee for their appraisal (they may have even paid the appraiser directly), the law prohibits the appraiser from providing them with a copy of the appraisal report without the consent of the lender. However, if you paid for the appraisal, you are entitled to a copy of it from the lender.
When an appraisal is performed for a lender, the borrower is NOT entitled to a copy of the appraisal report from the appraiser. This is because the appraiser’s client is the lender, not the borrower, even though the borrower pays the appraisal fee. A client is defined as the party that engages the appraiser to perform the assignment. The appraiser is required to protect the confidential nature of the appraiser-client relationship, and thus is prohibited by law from providing a copy of the appraisal, or disclosing the appraisal report to anyone other than the client.
Although the appraiser cannot provide the borrower with a copy of the appraisal without the client’s permission, the borrower has every right to receive a copy of the appraisal from the lender, provided they have paid for it and the loan involves a 1 to 4 unit property. According to the California Business and Professions Code 11423, a borrower has up to 90 days after the lender has provided notice of their lending decision to submit a written request for a copy of the appraisal.
Myth: Consumers need not be concerned with what is in the appraisal document so long as it satisfies the needs of their lending institution.
Reality: 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 - including 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: 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 and a Home Inspection are completly different items amd should never be confused for the other.
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