Appraisal myths & facts
By law, an appraiser must be state-licensed to perform appraisals for federally-backed purchases. Also by law, you have the ability to receive a copy of the completed report from your lender. Contact us if you have any concerns about the appraisal process.
Myth: The value that is assessed by the appraiser must be the same as the market value.
Fact: It might be that Indiana, like most states, supports the common myth that the assessed value equals the market value; however, this is sometimes the exception rather than the rule. Examples include when interior reconstruction has happened and the assessor does not know about the improvements, or when homes in the vicinity have not been reassessed for an prolonged period of time.
Myth: Depending on if the appraisal is done for the buyer or the seller, the appraised value of the property will vary.
Fact: The appraiser has no vested interest in the outcome of the appraisal report and should conduct services with independence, objectivity and impartiality - no matter for whom the appraisal is conducted.
Myth: Any time market value is found, it should be the same as the replacement cost of the house.
Fact: Market value is acquired by what a willing buyer would likely pay a willing seller for a particular home, with neither being under pressure to buy or sell. The dollar amount demanded to rebuild a property is what constitutes the replacement cost.
Myth: Specific methods, like the price per square foot of the property, are what appraisers use to ascertain the cost of a home.
Fact: Appraisers complete an exhaustive analysis of all factors pertaining to the cost of a house, including its location, condition, size, proximity to facilities and recent opinion of value of comparable houses.
Myth: As properties appreciate by a certain percentage - in a robust economy - the houses nearby are expected to increase by the same amount.
Fact: Price increase of a certain home must be concluded on a case-by-case basis, factoring in data on comparable properties and other relevant considerations. This is true in strong economic times as well as poor.
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Myth: You can commonly tell what a home is worth simply by looking at the outside.
Fact: There are a number of different factors that determine the value of a home; these factors include area, condition, improvements, amenities, and market trends. An external inspection definitely can't provide all of the information required.
Myth: Since you're the one paying for the appraisal report when applying for the loan to buy or refinance real estate, you own the provided appraisal.
Fact: Legally, the document is owned by the lender unless the lender relinquishes their interest in the report. Consumers have to be given a copy of the report upon written request because of the Equal Credit Opportunity Act.
Myth: Consumers need not care about what is in their document so long as it meets the needs of their lending institution.
Fact: Only if consumers examine a copy of their appraisal report 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 appraisal that will probably 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 vicinity.
Myth: The only reason someone would order an appraisal is if a home needs its cost estimated in a lender-based sales transaction.
Fact: Appraisers can have many varied qualifications and designations which allow them to perform a series of different services including - but definitely not limited to - advice on estate planning, tax assessment, zoning, dispute resolution in many different legal situations and cost analysis.
Myth: There's no reason to get an appraisal if you have had a home inspection.
Fact: Appraisal reports are completely different than a home inspection report. The task of the appraiser is to form an opinion of value in the appraisal process and through creating the report. A home inspector determines the condition of the home and its major components and reports their findings.