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What are the facts about Appraisals?
Assumption: The appraised value
of a property will vary, depending upon whether
the appraisal is conducted for the buyer or the seller.
FACT: The appraiser
has no vested interest in the outcome of the appraisal and
should render services with independence, objectivity and impartiality.
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Assumption: Appraisers are hired
only to estimate real estate property values in property sales
involving mortgage-lending transactions.
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 and cost/benefit
analysis.
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Assumption: Market value should
approximate replacement cost.
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.
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Assumption: Assessed value should
equate to market value.
FACT: While most
states support the concept that assessed value approximate 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.
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Assumption: Appraisers use a formula,
such as a specific price per square foot,
to figure out the value of a home.
FACT: 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 in the subject market area.
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Assumption: Because consumers pay
for appraisals when applying for loans to purchase or refinance
real estate, they own their appraisal.
FACT: The appraisal
is, in fact, legally owned by the lender - unless the lender
"releases its interest" in the document. However, consumers
may obtain a copy
of the appraisal report from their lender who had ordered the
report under the
Equal Credit Opportunity Act.
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Assumption: Appraisers are hired
only to estimate real estate property values in property sales
involving mortgage-lending transactions.
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.
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Assumption: In a robust economy
- when the sales 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 that same percentage.
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.
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Assumption: Consumers need not
be concerned with what is in the appraisal document so long as
it satisfies the needs of their lending institution.
FACT: 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.
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Assumption: An Appraisal is the
same as a home inspection.
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.
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Assumption: You generally can tell
what a property is worth simply by looking at
the outside.
FACT: Property value
is determined by a number of factors, including location,
condition, improvements, amenities, and market trends.
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