Appraisal myths & facts

By law, an appraiser needs to be state-licensed to perform appraisals for federally-backed purchases. Also by law, you are allowed to request a copy of the completed appraisal report from your lender. Contact our professional staff if you have any questions about the appraisal process.

Myth: Market value must be similar to the assessed value of the property.

Fact: It is possible that Maryland, like most states, validates the idea that the assessed value equates to the market value; however, this is sometimes the exception rather than the rule. Examples include when interior remodeling has occurred and the assessor does not know about the improvements, or when homes in the vicinity have not been reassessed for an prolonged period of time.

Myth: The value of a home will differ depending upon whether the appraisal is provided for the buyer or the seller.

Fact: The appraiser has no personal interest in the result of the report and should conduct his task with independence, objectivity and impartiality - no matter for whom the appraisal is written.

Myth: Market value should equate to replacement cost.

Fact: Market value is acquired by what a willing buyer would be interested in paying a willing seller for a specific property, with neither being under undue influence to buy or sell. The dollar amount needed to rebuild a house is what shows the replacement cost.

Myth: Appraisers use a formula, such as a certain price per square foot, to arrive at the worth of a house.

Fact: Appraisers make a full analysis of all factors in consideration to the cost of a property, including its location, condition, size, proximity to facilities and recent costs of comparable homes.

Myth: When the economy is robust and the cost of properties are found to be appreciating by a certain percentage, the other properties in the proximity can be expected to rise based on that same percentage.

Fact: All increase of value is on a one-on-one basis, found by information on relevant considerations and the data of comparable properties. It doesn't matter if the economy is doing well or declining.

Myth: Just seeing what the house looks like on the outside gives an excellent idea of its value.

Fact: To determine an accurate worth beyond all doubt, an appraiser must examine the property on a variety of factors based on area, condition, improvements, amenities, and market trends. An external inspection certainly can't provide all of the data needed.

Myth: Since you're the one coughing up the cash for the appraisal report when applying for the loan to purchase or refinance real estate, you own the provided appraisal.

Fact: The report is, in fact, legally owned by the lending agency - unless the lender "releases its interest" in the report. By the Equal Credit Opportunity Act, any consumer demanding a copy of the document must be provided with one by their lending company.

Myth: There's no point for home buyers to even worry about what the report contains so long as their lending institution is satisfied.

Fact: Only if consumers examine a copy of their appraisal can they double-check its accuracy and possibly need to question the result. Remember, this is probably the most expensive and important investment a consumer will ever make. There is a wealth of data stored in an appraisal that should be useful to the consumer in the future, such as 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 region.