Common 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 appraisal process and may
hold several misconceptions about it.
Following are the top seven misconceptions that most
people have about the 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 property is worth.
Truth: Appraisers actually weigh the
location of the property, its proximity to desirable schools and
other public facilities, the size of the lot, the size and
condition of the home (if applicable) 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
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 that a home has been well taken
Misconception: Anyone can be an
Truth: Federal law requires states to
establish minimum standards and licensing practices for real
Misconception: Appraisers have no
obligation to reveal property 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 property inspection.
Misconception: A property's assessed value
should equal its market value.
Truth: An appraisal is not a substitute
for a professional 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 property and its major components.
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.