Assumptions and Facts About the Appraisal Process
I hear many different misconceptions about appraisers and operating an Appraisal Management Company for a little over 8 years now, I have been able to separate assumptions from facts and for this weeks blog I thought it would be helpful to share some of them with all of you.
The first assumption is that the appraised value of a property will vary, depending upon whether the appraisal is conducted for the buyer or the seller. In fact, as an AMC it is my job to make with certain that any appraiser given a report has absolutely no vested interest in the outcome of the appraisal and should render services with independence, objectivity and impartiality.
A second assumption is that the market value should approximate replacement cost when in fact, 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.
A third assumption is that appraisers use a formula, such as a specific price per square foot, to figure out the value of a home. In fact, square footage plays a small part in the value of a home. An appraisers job is to make a detailed analysis of all factors pertaining to the value of a home including its location, condition, size, proximity to facilities and recent sale prices of comparable properties in the subject market area.
The fourth assumption is that appraisers are hired only to estimate real estate property values in property sales involving mortgage-lending transactions. In fact, depending upon their qualifications and designations, appraisers can and do provide a variety of services, including advice for estate planning, dispute resolution, zoning and tax assessment review, PMI removal and cost/benefit analysis.
A fifth assumption is that in a robust economy, when the sales prices of homes in a given area are reported to be rising by a particular percentage, then the value of individual properties in the area can be expected to appreciate by that same percentage. In fact, value appreciation of a specific property must be determined on an individualized basis, factoring in data on comparable properties and other relevant considerations. This is true in good times as well as bad.
A sixth assumption is that an appraisal is the same as a home inspection. In fact, an Appraisal does not serve the same purpose as an inspection. The Appraiser forms an opinion of value in the Appraisal process and resulting report. A home inspector determines the condition of the home and its major components and reports these findings.
Many more important assumptions and facts about Appraisals can be found on our website. Click the link below to access them all.
Hope this blog helped shed some light on some widely misunderstood roles of the appraisal process and appraiser’s role.
Thanks for reading!
Marlene C Minite
Founder and CEO of AAA Appraisal Management Company LLC.