Myths & Realities about Real Estate Appraisals and Appraisers
Here are some common myths about real estate appraisals and real estate appraisers. We hope that by reading these you will understand more about what Real Estate Appraisers do.
Myth: Economic conditions have no factor on my property. My property is worth the same every year or more. The most common myth in appraisal of properties.
Reality: The economy greatly impacts the value of properties. Value appreciation or depreciation is measured through analyzing different factors, and on an individual basis. Analysis of marketing trends, supply and other relevant data, and considerations are given. This is used in both the good and bad economic conditions.
Myth: I paid for the appraisal for my loan so it belongs to me.
Reality: When applying for a secured loan the consumer pays for the appraisal. The appraiser client is the Lender or also known as the intended user. The appraisal is used to provide security for the loan. The Lender has particular guidelines which the appraiser must follow. The appraiser also must conform to United Standards of Professional Practice (USPAP). The appraiser is an unbiased party in the process. By law the borrower is entitled to a copy of the appraisal which is obtained from the lender not the appraiser. The appraiser cannot give a copy to the borrower or discuss the appraisal without written approval from the lender.
Myth: So what’s it worth?
Reality: Many times home owners think an appraiser can tell the value after just the inspection. This is a false presumption, the appraiser’s job at this point has just begun the appraiser must gather factual data, verify, research and analyze. The whole process involves far more; the appraiser also has to conform to United Standards of Professional Practice.
Myth: Taxed Value equals Market Value.
Reality: Taxable value is based on Mass Appraising. This is the process of valuing a universe of properties. As of a given date. It is typically not the current value on one property. Depending on the year of data compiled by the taxing authority. Tax laws differ in States as to how often this data is updated. Taxing authorities also typically do not inspect the interior of the properties, and may not have data regarding additions, and improvements made.
Myth: I had a Home Inspection why an appraisal?
Reality: Appraisers are not Home Inspectors. Appraisers do not complete an inspection from the roof, through the structure, and mechanical systems. The Home Inspector’s report includes such items as evaluation of the heating/cooling system, electrical, plumbing. Roof and visible structural area’s as well as foundation, and interior walls, ceilings, floors, windows and doors. Additional inspections for Pest’s, Pools, Structural damage may also be required. Appraisers estimate value. Home Inspectors do not. Appraisers comment on a visual observation.
Myth: Everything I do to my property adds value.
Reality: Many improvement do add value, typically these are new kitchens, baths, and additions. Common misconceptions are items of deferred maintenance which are the components that are required to maintain the property. Hot water heaters, heating and cooling, roofs, doors windows, flooring these are items that tends to show in the overall condition. Cost of these items is not equal to the market value, but may affect the value. Cosmetic painting is the preference of the owner. Many people decorate to their own liking. Maintaining property is important in the overall value, but appraiser are often given lists of items that have no real value, or value is less than the cost of the item.
Myth: I put my address in a free on line home values and it told me what it is worth. What’s this?
Myth: There are many web sites that are using Automated Valuation Models, (AVMs) or Recent County records of recorded sales. There are many reasons these free home values are not reliable. Including some of the following:
- These are computer driven. The house may not be there they are showing.
- The comparable sales data may not be actual sales. Often these comparables are foreclosures, family sales, distressed sales, or fraudulent. These properties may never have been for sale on the market.
- Factors including negative impact of highways, heavily traveled streets, railroad tracks, or positive of waterfront locations, floor locations, views etc.
- Condition is also unknown. Whether there have been recent improvements, or additions.
- Assessed values rely on public assessment records. When was the last property assessment? Many states require assessments every 3 years some less. Values change as do properties, and market conditions.
- Market conditions are not factored in. Whether declining or appreciating.
- Who is imputing the data? What are their qualifications, experience, or locational competence? Chances are they have never been to the State or City.
- How old is the data being used on the site, where it is obtained, how accurate it is, and is it verified are the mysteries behind the AVM.
- AVM’s do not adjust for the differences which may affect value. Leading to misleading values.
- What’s free is free for a reason. Often these free sites are used for advertising for Real Estate companies, and others providing services.
These are just some myths about appraisers and appraisal practices the list goes on. If you have a question please do not hesitate to contact us by e-mail, or phone. With 23 years of experience we can certainly address any questions you may have.
Filed under: Main — admin @ July 16, 2008 5:01 am -->