Some Myths and Realities About
Real Estate Appraisals and Appraisers

Myth: The Tax Assessor's "assessed value" should equate to "market value".
Reality: While most states support the concept that assessed value approximates market value, this often is not the case. Limitations to accuracy are often dictated by the mass nature of the entire array of properties tabulated in a county or parish. Some assessors only use modified cost approaches to value property. In some jurisdictions, equalization is more the goal than is market value. Too, assessors may not make thorough inspections. For example, when interior remodeling has occurred or a pool is added, the assessor may be unaware of the new improvements for years. Interior inspections are often infrequent and logistically impractical on a mass scale.

Myth: The appraised value of a property will vary, depending upon whether the appraisal is conducted for the buyer or the seller.
Reality: The professional appraiser has no vested interest in the outcome of the appraisal and should render services with independence, objectivity and impartiality - no matter for whom the appraisal is conducted. Non-bias is the hallmark of good appraisal work.

Myth: Market value should approximate replacement cost.
Reality: Market value is based on what a willing buyer likely would pay a willing seller for a particular property, with neither being under pressure to buy or sell. Replacement cost is the dollar amount required to reconstruct a property in-kind. Thus, the concepts are entirely different. Appraisers often utilize replacement costs in certain analyses they perform, especially in the Cost Approach. Much confusion stems from insurance concepts which typically may not relate closely to market value.

Myth: Appraisers use a formula, such as a specific price-per-square-foot, to figure out the value of a home.
Reality: Appraisers make a detailed analysis of all factors pertaining to the value of a home including its location, site, condition, size, equipment, features, and the recent sale prices of comparable properties. To solely use "price per SF" is considered a generic and crude measure, though it is a useful and widely used method of expression.

Myth: In a robust economy - when the sales prices of homes in a given area are reported to be rising by a particular percentage - the value of individual properties in the area can be expected to appreciate by that same percentage.
Reality: Value appreciation or other change for a specific property must be determined on an individualized basis, factoring in data on comparable properties and other relevant market considerations. This is true in good times as well as bad. Nothing ever guarantees that properties will rise in value like clockwork.

Myth: You generally can tell what a property is worth simply by looking at the outside.
Reality: Property value is determined by a number of factors, including location, condition, improvements, amenities, and market trends. Not inspecting the inside of a property tends to limit the accuracy of an appraisal. Would the appraiser know the extent and quality of a recent remodeling project, if restricted to an exterior inspection.

Myth: Because consumers pay for appraisals when applying for loans to purchase or refinance real estate, they "own" their appraisal.
Reality: The appraisal is, in fact, legally owned by the lender/client - assuming proper engagement - unless the lender "releases its interest" in the document. However, consumers must be given a copy of the appraisal report, upon written request, under the Equal Credit Opportunity Act. Payment of the appraisal fee does not make the consumer the client or change this reality. However, an individual can always order an appraisal for their own non-lending purposes.

Myth: Consumers need not be concerned with what is in the appraisal document so long as it satisfies the needs of their lending institution.
Reality: Only if consumers read a copy of their appraisal can they double-check its accuracy and its validity. The appraisal report makes a valuable record for future reference, containing useful, time-specific and often-revealing information - including 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 as of the date of appraisal.

Myth: Appraisers are hired only to estimate real estate property values in property sales involving mortgage-lending transactions.
Reality: Depending upon their qualifications and experience, appraisers can and do provide a variety of services, including advice for estate planning, pricing advice, dispute resolution, zoning and tax assessment review and cost/benefit analysis.

Myth: An Appraisal is the same as a home inspection.
Reality: An Appraisal does not serve the same purpose as a professional  inspection. The Appraiser does inspect the property, but with a view to forming an opinion of value in the Appraisal process and resulting report. A professional home inspector offers a higher level of examination and testing. The in-depth determination of the condition of the home, the status of its major components and possible repair recommendations form a higher level of inspection. Ideally, the appraiser should be provided a copy of the professional inspector's report prior to starting the appraisal assignment in order to factor in the results of the report in the value determination.