Common Home Appraisal Misconceptions
Though most of us will undergo a home appraisal at some point in our lives, it is still not something that we experience on a regular basis. As a result, many people are unfamiliar with the complete home appraisal process and may hold several misconceptions about it.
Following are the top seven misconceptions that most people have about the home appraisal process as well as the actual truth for each misconception.
Misconception: Appraisers use a specific formula (for example, price per square foot) to figure out exactly how much a home is worth.
Truth: Appraisers actually weigh the location of the home, its proximity to desirable schools and other public facilities, the size of the lot, the size and condition of the home itself, and recent sale prices of comparable properties, among numerous other factors.
Misconception: An appraisal’s primary purpose is to ensure that a buyer does not pay too much for a house.
Truth: While providing valuable information to both the buyer and the seller, an appraisal’s primary purpose is usually to protect the lender, who does not want to be stuck owning overpriced property.
Misconception: There is nothing I can do to improve my home’s valuation.
Truth: The overall maintenance of a home is of primary interest to appraisers. They will look to see: if the walls, flooring, and floor coverings are in good shape; if the built-in appliances are in good working order; and if the mechanical systems (plumbing, electrical, heating, and cooling) are functioning properly. So keeping a well-maintained home is of vital importance to receiving a good valuation. In addition, while good housekeeping is not a requirement, having a clean, orderly home can also indicate to an appraiser and the lender, that a home has been well taken care of.
Misconception: Anyone can be an appraiser.
Truth: Federal law requires states to establish minimum standards and licensing practices for real estate appraisers.
Misconception: Appraisers have no obligation to reveal home defects to buyers.
Truth: If the buyer is applying for a mortgage that will be insured by the Federal Housing Administration (FHA), the appraiser must survey the physical condition of the home and disclose potential problems to the buyer. No such obligation exists for non-FHA mortgages.
Misconception: An appraisal is identical to a home inspection.
Truth: An appraisal is not a substitute for a professional home inspection. The appraiser formulates an opinion of the property’s value for the lender, while the inspector educates the buyer about the condition of the home and its major components.
Misconception: A home’s assessed value should equal its market value.
Truth: Interior remodeling that an assessor is unaware of and nearby properties that have not been assessed for an extended period of time could both greatly impact the assessed value of a home.