Q & A
Q: Will the appraised value of a property vary, depending upon whether the appraisal is conducted for the buyer or the seller?
A: The appraiser has no vested interest in the outcome of the appraisal and will render services with independence, objectivity and impartiality. There should be no difference in value.
Q: What is meant by a ‘range of value’?
A: Most property falls within a bracket, or range of values indicated by comparable sales. The narrower that range is, the greater the confidence may be in a point-specific value. Alternatively, the greater the range, the lower the confidence rating is for a specific value. Most clients require a specific number within the adjusted comparable sales range. Appraisers carefully consider the available market data and value indicators that are most relevant to the property interest being appraised. They then develop and support an expressed opinion of value that is usually at or between the low and the high end of their indicated range.
Q: Does market value approximate replacement cost?
A: 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.
Q: Does assessed value equate to market value?
A: While most states support the concept that assessed value approximates 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. In California, Article Thirteen of the State Constitution formerly known as Proposition 13 results in conditions where the more time that passes from the last sale, the further away the assessment is from market value.
Q: Do appraisers use a formula, such as a specific price per square foot, to figure out the value of a home?
A: 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. Any formula, when and if used, must truly reflect typical buyer and seller actions found in the market.
Q: Who owns the appraisal?
A: The appraisal is, in fact, legally limited to the designated lender-client unless the lender "releases its interest" in the document. However, consumers may by law obtain a copy of the appraisal report from their lender who had ordered the report under the Equal Credit Opportunity Act. The appraiser is forbidden by both federal and state appraisal regulations from giving or discussing the appraisal with anyone other than the client, unless authorized by the client to do so.
Q: Are appraisers hired only to estimate real estate property values in property sales involving mortgage-lending transactions?
A: 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. Appraisers also appraise for IRS tax related non cash charitable donations; gift taxes, estate taxes, fractional interests, partial interests and conservation easements. There are many more appraisal services provided. The best bet if you have a question, is to ask.
Q: In a robust economy - when the sales prices of homes in a given area are reported to be rising by a particular percentage - can the value of individual properties in the area also be expected to appreciate by that same percentage?
A: 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. A broad market increase or decrease of 5% does not mean a specific property also had a 5% increase or decrease.
Q: Do consumers need to be concerned with what is in the appraisal document as long as it satisfies the needs of their lending institution ?
A: 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. A properly completed cost approach provides them with the basis for improvement depreciation for tax purposes.
Q: Is an appraisal the same as a home inspection?
A: 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
Q: Can you generally tell what a property is worth simply by looking at the outside?
A: The short answer is “no”. Property value is determined by a number of factors, including location, condition, improvements, amenities, and market trends. Exterior inspections with certain specifically stated assumptions, can sometimes provide reasonably close indications of value, however, if the underlying assumptions are later found to be untrue, then the opinion of value would be affected.