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Appraisal Myths
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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. |
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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.
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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.
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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: 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. |
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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.
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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 must be given
a copy of the appraisal report, upon written request, under the Equal Credit Opportunity
Act.
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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. |
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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.
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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.
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