10 Home Appraisal Myths You Should Ignore

Several myths surround the home appraisal process, and it can be understandable because home appraisals can be confusing to homeowners. After all, why is someone valuing your home after you’ve received an offer? And is the appraiser factoring in all those weekends you spent on home upgrades?

A home appraisal determines the fair market value of a property, influencing mortgage approval, property taxes, and ensuring a fair transaction price for buyers and sellers.

Understanding the myths surrounding a home appraisal can help homeowners and buyers make informed decisions based on accurate information.

 

Myth #1: Appraisers Use A Formula To Determine Home Value

A common way for realtors to determine a list price is to use a formula, such as a specific price per square foot, to figure out the value of a home. For example, if your neighbor has 3000 square feet and is selling for $600,000, you may believe your similar size home is worth the same.

However, the reality is appraisers evaluate various elements of a home including the finishes, location, condition, size, proximity to facilities and recent sale prices of comparable properties.

 

Myth #2: An Appraisal For Refi Is Different Than An Appraisal For A Sale

The truth is the two are not different. An appraiser does not take into account what the home loan is used for, they are looking at the value of a home to determine market value.

 

Myth #3: Once The Appraiser Visits The Home For An Appraisal Inspection, The Appraisal Is Complete & The Appraisal Report Is Ready

Most homeowners do not realize the amount of work that goes into an appraisal after the appraiser visits their home. The office work after the appraisal inspection can take anywhere from 2-48 hours or more depending on the complexity of the property being appraised. They complete more research and reports, find comparables and take pictures of each one, then take all the information gathered, analyze it, and complete required guidelines before they can determine an accurate value and finish the appraisal report.

 

Myth #4: Free Online Home Valuations Are Accurate

The truth is, a free home valuation or Automated Valuation Model (AVM) has no way of knowing what improvements you have done to the property or if you have trashed the place. If you have an AVM done on your home by several different companies, the results could vary by 20% or more. If you have more than one appraisal completed by qualified appraisers it is likely that the results would be very similar.

 

Myth #5: The Appraised Value Equals The Market Value

While the appraised value is a crucial factor, the market value is influenced by various factors, including buyer-seller negotiations and market conditions. Learn more about the differences between appraised value and market value.

 

Myth #6: Home Improvements Always Increase The Appraised Value

The reality is, not all improvements guarantee a higher appraisal. The impact depends on factors like the type of improvement, its quality, and the local real estate market.

 

Myth #7: The Appraiser Is Solely Working For The Buyer

In most cases, appraisers are hired by the lender to assess the value of the property. The appraisal ensures the property's value aligns with the loan amount. While the buyer pays for the appraisal as part of closing costs, the appraiser's primary responsibility is to provide an independent and unbiased valuation for the lender.

 

Myth #8: The Home's Listing Price Is The Appraised Value

The listing price is set by the seller, and is not required to align with the appraised value. The seller may not even know the appraised value when setting the listing price. Appraisers use objective criteria to determine home value independent of the listing price, although they will most likely know the selling price of the home.

 

Myth #9: The Appraiser Will Find All Home Defects

While appraisers may note obvious issues, their primary focus is to protect the lender (Fannie Mae, FHA, VA Etc.). Lenders don't want to own overpriced property and that's why the appraisal takes place before the lender grants final approval of the buyer's loan.

With that in mind, it's not surprising that appraisers aren't interested in whether or not the house is clean - but they do notice signs of neglect such as cracked walls, chipped paint and broken windows.

A home inspection is a separate process looking for any defects with the home that may cause you financial grief later and educates the buyer about the condition of the home and its major components.

 

Myth #10: The Homeowner Can Influence The Appraised Value By Telling The Appraiser What It Should Be

This is far from the truth. Appraisers follow professional guidelines and standards. Homeowners providing input on value doesn't impact the appraiser's objective analysis.

 

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