Appraisal myths & facts
Legally, a real estate appraiser must be state certified to produce substantiated real estate appraisals for federally-supported sales. You are also entitled by law to request a copy of the finished appraisal report from your lender. Contact NorthStar Realty Services if you have any questions about the appraisal procedure.
Myth: Assessed value will always be equal to market value.
Fact: It is possible that Minnesota, like most states, supports the idea that the assessed value equates to the market value; however, this is not often the case. Examples include when interior remodeling has occurred and the assessor is unaware of the improvements, or when houses in the area have not been reassessed for an extended period.
Myth: The buyer or the seller may have some pull in the cost of the home depending upon for whom the appraiser is working.
Fact: The appraiser has no vested interest in the outcome of the report and should complete his task with independence, objectivity and impartiality - no matter for whom the appraisal is provided.
Myth: The replacement cost of the house will be is on par with the market value.
Fact: Without any influence from any outside parties to buy or sell, market value is what a willing buyer would pay a willing seller for a particular property. If the home were reconstructed, the dollar amount necessary to do so would be the replacement cost.
Myth: There are certain methods that appraisers use to find the cost of a home, like the price per square foot.
Fact: There are many numerous formulae that an appraiser will use to make an in-depth analysis of every factor pertaining to the property, such as the size, location, condition, how close it is to undesirable facilities and the opinion of value of recently sold comparable homes.
Myth: In a robust economy - when the costs of houses in a given region are reported to be increasing by a particular percentage - the costs of individual homes in the vicinity can be expected to appreciate by that same percentage.
Fact: All increase of price is on a one-on-one basis, found by data on relevant considerations and the data of comparable homes. It doesn't matter if the economy is doing well or declining.
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Myth: Just looking at what the house looks like on the outside gives an idea of its cost.
Fact: To determine an accurate value beyond all doubt, an appraiser must examine the property on a variety of factors based on area, condition, improvements, amenities, and market trends. There's no possible way to get all of this data from simply examining the house from the outside.
Myth: Since you're the one providing the money for the appraisal when applying for the loan to purchase or refinance your home, you own the ordered appraisal.
Fact: The document is, in fact, legally owned by the lender - unless the lender "releases its interest" in the appraisal. However, consumers have to be given a copy of the appraisal report upon written request, through the Equal Credit Opportunity Act.
Myth: It doesn't matter to consumers what's in the appraisal so long as it meets the requirements of their lender.
Fact: It is very important for home buyers to go through a copy of their report so that they can verify the accuracy of the document, in case they need to question its accuracy. Remember, this is probably the most expensive and important investment a consumer will ever make. An appraisal can serve as a record for the future, as it contains a great deal of data - including, but certainly 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 vicinity.
Myth: There is no reason to order an appraisal unless you are trying to get an estimate of the value of a property during a sales transaction involving a lending institution.
Fact: Based upon their qualifications and designations, appraisers can and will provide a lot of different services, including advice for estate planning, dispute resolution, zoning and tax assessment review and cost/benefit analysis.
Myth: There's no need to get an appraisal if you order a home inspection.
Fact: Appraisal reports have almost nothing in common with a home inspection. The task of the appraiser is to conclude an opinion of value in the appraisal process and through writing the report. The purpose of a home inspector is to find the condition of the home and its major components, then create a report on these findings.