Whether you’re planning on buying or selling a home, chances are good that you’ll come into contact with an appraiser at some point; however, while most of us have a basic understanding of what a home appraisal is, there are a lot of myths that surround the process that are worth understanding before making the decision to buy or sell.
MYTH: The appraised value of a property will vary depending upon whether the appraisal has been completed for the buyer or seller.
REALITY: Since the appraiser has no vested interest in the outcome of the appraisal, they should conduct their assessment with a sense of objectivity and no special regard for the party who initiated the process.
MYTH: A home’s market value should be in line with its replacement cost.
REALITY: While market value seems like it should be related to replacement cost, it’s important to understand the distinction between the two ideas since they are actually quite different. For example, even though your home’s replacement cost may be set at $450,000, its market value may sit closer to $400,000. In short, market value represents the amount of money a buyer would likely pay when not under pressure to buy or sell, while replacement cost represents the actual dollar amount required to reconstruct the property in-kind.
MYTH: Appraisers use a formula, which details the specific price per square foot, to settle upon the value of a home.
REALITY: When an appraisal is completed, all factors pertaining to the home’s value are taking into account, including its location, condition, size, proximity to local facilities, and recent sale prices of comparable properties.
MYTH: When the sale prices of homes in any given area are reported to be rising by a particular percentage, local homeowners can expect their individual properties to appreciate by the same percentage.
REALITY: While area can make a difference, value appreciation of specific properties is still determined on an individual basis, which takes into account factors such as data on comparable properties and other relevant considerations.
MYTH: When applying for purchase or refinancing loans, consumers pay for their appraisal, which means they “own” it upon completion.
REALITY: While a small portion of your loan may go towards paying for the appraisal, it is, in fact, legally owned by the lender. Still, under the Equal Credit Opportunity Act, consumers who submit a written request must be furnished with a copy of their appraisal report.
MYTH: An appraisal is the same as a home inspection.
REALITY: Yes, at first glance the two job descriptions may seem similar; however, their final functions remain quite different. The purpose of an appraiser is to form an opinion of the value of a home—and to process the resulting report—while a home inspector determines the condition of the home and its major components before stating their findings.
In the end, if you’re looking to add value to your home for an expected appraisal or you would like to know more about the process, it’s important to speak with an experienced Realtor who can help you not only make the right decisions, but feel comfortable about the appraisal proceedings.
If you would like to know more, please feel free to contact me. I’m always here.
Marie Dinsmore | The Dinsmore Team | www.dinsmoreteam.com | 770-712-7789