Some Myths and Realities About
Real Estate Appraisals and Appraisers

Myth: Assessed value should equate to market value.
Reality: While most states support the concept that assessed values approximate 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 re-assessed for a long 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 an appraisal and their services are independent, impartial and objective - 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 would pay a willing seller for a particular property, when neither is under pressure to buy or sell. Replacement cost is different. It is the dollar amount required to re-construct a like-kind property improvement.

Myth: Appraisers use a formula, such as a specific price per square foot, to figure out the value of a property.
Reality: Appraisers make a detailed analysis of all factors pertaining to property value including legal and economic characteristics, physical features such as location, condition, size, proximity to facilities and recent sale prices of comparable properties viewed by buyers as alternative substitutes.

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 and depreciation is determined on an individual property basis. Factoring in data on comparable properties and other relevant considerations is an important part of the appraisal analysis but not all properties appreciate or depreciate at the same rate due to the diversity of housing markets and the affects of change which is constantly occuring. This is true in good economic cycles as well as in declining economic cycles.

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, type of improvements, amenities and market trends.

Myth: Because consumers pay for appraisals when applying for loans to purchase or refinance real estate, they own the appraisal report.
Reality: The appraisal report 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 by their lender under the Equal Credit Opportunity Act.

Myth: Consumers shouldn't be concerned with what is contained in the appraisal document as long as it satisfies the needs of their lending institution.
Reality: Only if consumers read a full copy of the appraisal report can they double-check its accuracy regarding physical features and question the information contained in it. Also, the appraisal report is a valuable record for future reference - containing useful and often-revealing information - including the legal and physical description of the property, square footage measurements of gross living area, the neighborhood description and a narrative of current real-estate activity and market trends in the vicinity.

Myth: Appraisers are hired only to estimate real estate property values for mortgage-lending transactions.
Reality: Depending upon their qualifications, designations and expertise, Appraisers can and do provide a wide variety of valuation services, including trust asset valuation, marital asset division, estate tax matters, property value dispute resolution, tax assessment review, cost/benefit investment analysis, feasibility studies, market surveys, highest and best use determinations and other varied studies.

Myth: An Appraisal is the same as a home inspection.
Reality: An Appraisal is not the same as an inspection. The Appraiser observes the relevant features of a property being appraised and develops an opinion of defined value after conducting field research, verification of facts and further study and analysis of legal and economic information as part of the Appraisal process and then compiles a report containing statements, opinions and conclusions based on accepted appraisal methods and economic principles as they apply to real property (tangible and intangible). A home inspector determines the physical condition of a home and its major components and reports these findings.