Debunking Myths About The Appraisal Process

Debunking Myths About The Appraisal Process

Navigating the real estate market can be a daunting task, especially when it comes to understanding the appraisal process. There are numerous misconceptions about our profession and the appraisal process we have encountered over the years. Here are some of the most common misconceptions and our attempt to provide clarity around this often misunderstood profession.

Myth 1: Appraisals and Inspections Are the Same

Contrary to popular belief, an appraisal is not the same as a home inspection or engineer inspection. An appraiser is a valuation specialist whose job is to prove an evidence-based opinion of the most likely value of a house based on factors such as location, improvements, and current market trends. A home inspector or engineer is a building science specialist who focuses on the condition of the home and its major components.

Myth 2: Appraisals Are Solely Based on the House

While the physical attributes of a house play a significant role in its appraisal, other factors affecting the location value also influence the overall value. An appraisal is a snapshot of your home’s value at a particular moment, considering all these factors.

Myth 3: Home Improvements Always Increase A Home’s Value

While some home improvements can increase the value of your home, others may not have the impact you expect. For instance, the market may not be willing to pay dollar for dollar what it costs to install high-maintenance landscaping, an oversized shop, solar panels, or any other highly customized feature; no matter how much it is loved by the current occupants. Routine care like upgraded utilities, a new septic system, or a recently serviced furnace is expected and may not significantly increase the value of your home.

Myth 4: The Appraised Value Should Match the Sale Price

The appraised value of a property may not always match the sale price. The appraised value is an impartial estimate of the most likely value of a property given normal conditions and neither the buyer nor the seller are under duress. This is different from the sale price which is the amount to which a specific buyer and seller agreed. Although the sale price is one data point an appraiser considers, it is not the only data point, and one buyer does not necessarily represent the overall market.

Myth 5: Appraisals Are Owned By The Payer

Although you may be paying for the appraisal, the document is legally owned by the direct client of the appraiser, typically the lending company in the case of a transaction. However, under the Equal Credit Opportunity Act, home buyers must be provided with a copy of the document upon written request.

Myth 6: Zillow Is As Accurate As An Appraisal

Online estimations like Zillow’s Zestimates are unlikely to provide an accurate estimate of a home’s value. These estimates are based on publicly available data and algorithms built for homogeneous cities in the Lower 48, neither of which relate well to our unique real estate market. An appraisal is conducted by trained professionals who physically inspect the property and understand local market trends.

Myth 7: An Appraisal Is Only Necessary for Lender-based Transactions

While appraisals are often associated with buying or refinancing a home, they can serve other purposes as well. Appraisals can be useful for tax assessments, legal disputes, estate planning, and more.

Understanding these myths can help you navigate the real estate appraisal process with confidence. If you have more questions or need an expert appraisal, don’t hesitate to contact us. We’re here to help you make informed decisions about your property.