APPRAISAL MYTHS
Myth: Assessed value should equate to market value
Reality: While most provinces support the concept that assessed value approximates estimated market value, this often is not the case. Examples include when interior remodeling has occurred and the assessor is unaware of the improvements, or when properties in the vicinity have not been reassessed for an extended period.
Myth: The appraised value of a property will vary, depending whether the appraisal is conducted for the buyer or the seller
Reality: The appraiser has no vested interest in the outcome of the appraisal and should render services with independence, objectivity and impartiality – no matter whom the appraisal is conducted for.
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 parties being under pressure to buy or sell. Replacement cost is the dollar amount required to reconstruct a property in-kind.
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, condition, size, proximity to facilities, and recent sale prices of comparable properties.
Myth: In a robust economy, when the sale 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 the same percentage
Reality: 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.
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.
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 – unless the lender “releases its interest” in the document.
Myth: Consumers don't need to be concerned about 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 question the result. Also, it makes a valuable record for future reference, containing useful 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.
Myth: Appraisers are hired only to estimate real estate property values in property sales involving mortgage-lending transactions
Reality: 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 and cost/benefit analysis.
Myth: An appraisal is the same as a home inspection
Reality: 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.