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 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 property is worth.
Truth:   Appraisers actually weigh many variables in analyzing a property and coming to an opinion of value. The price per square foot is one unit of measurement, but the appraiser also considers the location of the property, the quality of its components and amenities, the age of the improvements, the condition of the improvements, and many 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 to provide an unbiased opinion of value that will allow all parties to make  informed decisions. The appraiser is not an advocate to any party, thus the term unbiased. 

Misconception:   Anyone can be an appraiser.                                                    Truth:   Federal law requires states to establish minimum standards and licensing practices for real estate appraisers. Specific course work must be accomplished and years of apprenticship are a requirement for licensure.

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 client, while the inspector educates the buyer about the condition of the home and its major components. While the appraiser considers the condition of the home and major components, it also considers many other factors.

Misconception: A home’s assessed value should equal its market value.
Truth: Assessed value is a comparison of a value relationship for similar property types in a given neighborhood or geographic location. While generally predicated on market value, the assessed value should never be assumed to be the same as market value. Generally, the assessed value in central Florida Counties is reduced from the estimated market value by 10% to 20% to allow for sales and marketing costs. Assessed value is generally not considered market value, but is a fair value as the intent is assess the values of all like kind properties in a given locality equitably and fairly.