When it comes to appraisals, there are many misconceptions. In this section, we will reveal the truth in some of the more common myths.
Myth: The professional appraisal is the same as the real estate agents opinion of the value.
Reality: A professional appraisal is more than just an opinion. It has value for financing as well as many other uses and is a legally binding document.
Myth: Appraisers use a formula, such as a specific price per square foot, to figure out the value of a home.
Reality: Appraisers make a detailed analysis of all factors pertaining to the value of a home including its location, condition, size, proximity to facilities and recent sale prices of comparable properties.
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: You generally can tell what a property is worth simply 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 consumers pay for appraisals when applying for loans to purchase or refinance real estate, they own their appraisal.
Reality: The appraisal is, in fact, legally owned by the lender – unless the lender “releases its interest” in the document. However, consumers may be given a copy of the appraisal report. This will depend upon the lender releasing their interest, the request must be written and release is at the discretion of the appraiser.
Myth: An Appraisal is the same as a home inspection.
Reality: An Appraisal does not serve the same purpose as an inspection. The Appraiser forms an opinion of value in the Appraisal process and resulting report. A home inspector determines the condition of the home and its major components and reports these findings.