Debunking Appraisal Myths
Myth: There is an appraiser's formula that includes specifics about your home, such the price per square foot, to figure out exactly how much each home is worth.
Fact: There are many factors that an appraiser must use to determine the value of your home. The appraiser uses factors such as the location of your home, its distance from good schools and other public facilities, the size and condition of the your home, recent sales prices of comparable properties in your area, the actual size of your lot, and many more factors to determine your property's worth.
Myth: A home appraisal is identical to a home inspection.
Fact: An appraisal is an estimation about your property's worth based on it's current condition. An inspection is used by the home buyer or seller to learn of the property's condition. An inspection is used educate someone about a property, where an appraisal is used to place a value on the property.
Myth: An appraiser can be anyone with knowledge of local real estate and market valuations.
Fact: Federal law requires every state to establish and maintain a minimum set of standards for real estate appraisers. Appraisers in that state must be licensed, and have been through a minimum set of training standards. This is usually accomplished through strict testing and apprenticeship rating hours.
Myth: Appraisers have no obligation to release their findings to potential buyers.
Fact: For mortgages that will be insured by the Federal Housing Administration (FHA), the appraiser must assess the complete physical condition of the home, and disclose potential problems to the buyer. For non-FHA mortgages there are no such obligations.
Myth: The purpose of an appraisal is to ensure the buyer doesn't overpay for the house they want.
Fact: An appraisal can provide information to both the buyer and the seller. The appraised value can ensure that a buyer does not overpay, while also verifying to the seller that the listing price is fair market value.
Myth: An appraisal is the set value that a home should be bought or sold for.
Fact: An appraisal is an estimation based on many factors from a market expert. The final sale price is negotiated and set to what both the buyer and seller can be happy with.
Myth: An appraisal is only based on comparable sales, and not the price it would take to build the home.
Fact: Comparable sales of homes in your area is only a factor in how an appraiser finds the estimated worth of your home. The appraiser may also take into consideration the cost it would take to build a home in you are including cost of materials, labor, etc.