Common myths about appraising
By law, an appraiser needs to be state-licensed to perform appraisals for federally-related transactions. Also by law, you have the right to demand a copy of the finished appraisal from your lending agency. Contact TNT Appraisal MN if you have any questions about the appraisal procedure.
Myth: Assessed value should always equate to market value.
Fact: It is possible that Minnesota, like most states, validates the idea that the assessed value is the same as the market value; however, this is sometimes the exception rather than the rule. For example, when interior remodeling has occurred and property has not been re-assessed, the values may vary wildly.
Myth: The buyer or the seller will have an influence in the value of the property depending upon for whom the appraiser is working.
Fact: There is no personal interest on the part of the appraiser in the outcome of the analysis, therefore the appraiser will conduct the work with impartiality and independence, no matter for whom the appraisal is ordered.
Myth: The replacement value of the property is always is on par with the market value.
Fact: Market value is what a typical, willing buyer would be interested in paying a typical, willing seller for a specific home, with neither being under duress to buy or sell. The replacement value is dependent upon the size and quality of the structure and current building costs.
Myth: Specific formula, such as the price per square foot of the property, are the methods appraisers use to ascertain the price of a house.
Fact: Appraisers make a detailed analysis of all factors in consideration to the cost of a property, including its location, condition, size, proximity to facilities and recent sales prices of comparable homes. Price/sf is appropriate for comparison of new construction but has little relevance in older homes due to varying degrees of maintenance, updating/improvements, etc.
Myth: As houses appreciate by a specific percentage - in a strong economy - the properties around the appreciating properties are figured to appreciate by the same amount.
Fact: Any price at which an appraiser arrives concerning a certain home is always personalized, based on certain factors found from the information of comparable houses and other considerations within the property itself. This is true in good economic times as well as poor.
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Myth: Just seeing what the home looks like on the outside gives an excellent idea of its cost.
Fact: To find an accurate value beyond all doubt, an appraiser must assess the home on a variety of factors based on location, condition, improvements, amenities, and market trends. An external inspection definitely cannot provide all of the information necessary.
Myth: Because the consumer is the party who provides the money to pay for the appraisal when applying for a loan for any real estate transaction, by law the appraisal report is theirs.
Fact: Unless a lender releases its vestment in the appraisal report, it is legally owned by the lending agency that engaged the appraiser. By the Equal Credit Opportunity Act, any consumer demanding a copy of the document must be provided with one by their lending agency.
Myth: Home buyers need not worry about what is in their appraisal document so long as it exceeds the needs of their lending agency.
Fact: A home buyer should definitely look through their report; there may be some questions or some worries with the accuracy of the analysis that must be addressed. Remember, this is probably the most expensive and important investment a consumer will ever make. An appraisal report can serve as a record for the future, as it contains an exorbitant amount of information - including, but not limited to 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 area.
Myth: Appraisals are ordered only to estimate real estate property values in property sales involving mortgage-lending transactions.
Fact: Many sellers are hiring appraisers to complete a pre-listing appraisal to determine an appropriate list price and buyers without mortgage financing are also requesting an appraiser to provide an independent 3rd party opinion of value prior to closing on a home. Appraisers can have many varied qualifications and designations which allow them to perform a multitude 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: A house inspection serves the same purpose as an appraisal.
Fact: An appraisal does not fulfill the same purpose as an inspection report. The purpose of an appraisal report is to arrive at an opinion of fair market value during the appraisal process and the production of the appraisal report. House inspectors will write a report that will show the condition of the home and its major components and possible damage.