Each property is unique, and the appraiser relies on his
or her general expertise and specific research to arrive at an opinion
of value. Appraisals are an infrequent experience for most consumers,
who consequently tend to have some misconceptions about the process and
the results. Here are some common myths and facts:
MYTH: The primary purpose of an appraisal
is to make sure the buyer does not pay too much for the house.
FACT: An appraisal provides valuable information
for the buyer and the seller, but the appraiser’s primary mission is to
protect the lender. Lenders do not enjoy owning overpriced property,
so that is why the appraisal takes place before the lender grants final
approval of the buyer’s loan.
MYTH: Appraisers use a specific formula (e.g.,
price per square foot) to figure out exactly how much each home is worth.
FACT: Appraisers weigh the location of the
home, such as its proximity to the desired amenities (schools, parks, public transportation, convience to employment opportunities and other factors),
the size and orientation of the lot, the size and utility of the home itself, as well as condition and modernization of the home. Recent
listings, pendings and sale prices of competing properties are amongst many of the factors considered to arrive at the value opinion.
MYTH: Good housekeeping can improve a home’s
valuation.
FACT: Appraisers are not interested in whether
or not the owner had dusted that day or if he or she is in the middle of
folding laundry. Housekeeping is not the issue, although a
clean home can indicate a home that has been well taken care of.
The overall maintenance of the home is of primary interest: Are the walls,
flooring, and floor coverings in good shape? Are the built-in appliances
in good working order? Are the mechanical systems (plumbing, electrical,
heating, and cooling) functioning properly?
Are the quality of the materials found in the home expected in the marketplace, or are they superior or inferior to the market standards?
MYTH: Anyone who has a clipboard and business
cards can be an appraiser.
FACT: Federal law requires states to establish
minimum standards and licensing practices for real estate appraisers.
In Illinois, for example, appraisers must take several courses, pass an
examination, and complete 2,000 hours of supervised appraisal work.
To find out All About Appraising,
click here.
MYTH: Appraisers have no obligation to reveal
home defects to buyers.
FACT: 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.
MYTH: An appraisal is the same as a home
inspection.
FACT: The new FHA disclosure requirement
notwithstanding, 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 educate the buyer about the condition
of the home and its major components. The appraiser views the home through the eyes of a potential purchaser. For a qualified home inspector
in the Chicago area, contact our friends at Housemaster
or contact an American Society of Home Inspectors (ASHI) certified inspector
- for a referral of an inspector in your area, visit www.ashi.com.
For other Facts and Myths in the Relocation Appraisal
Profession, please visit the article titled The Myth of the Matchbook Appraisal, authored by Bradford
E. Charnas, SRA.
