Common Appraisal Myths

I am a full time real estate broker, but I am also a certified residential appraiser.  In fact, I just stopped accepting appraisal assignments a couple of months ago to focus exclusively on selling real estate.  This may become an on-going blog series but here are a few appraisal myths I have heard many times over.

1.                  Appraisals for refinance purposes are different than for a purchase.

The methodology is exactly the same in the appraisal for a lender whether it is for a purchase transaction or for a refinancing.  The main difference between the two appraisals is that the purchase contract is analyzed in a purchase and the data

2.                  A variation on the above is that the appraisal will be different if completed for the buyer than one completed for the seller.

The appraiser’s role is to be an unbiased third party and if completed correctly, it should not matter who hired the appraiser.   One thing to keep in mind is that the purpose of the appraisal could be different depending on who ordered the appraisal.  A seller ordering an appraisal to determine how much to list the house for may be different than an appraisal completed by the buyer’s lender to determine the fair market value of the house. 

3.                  Spending $50,000 in repairs/improvements will increase the value of the home by $50,000.

Ultimately the buyer decides how much value a particular improvement will be worth.  The appraiser must determine how much additional value a particular item will contribute, usually by looking at recent sales of homes with a similar type of improvement and extracting out.  

4.                  Appraisers use a formula like price per square foot or have a set list of adjustments to determine the value of a house.

There is no magic list.  Adjustments are derived by market reaction, for example in some high-end neighborhoods a house with a swimming pool may sell for $50,000 to $100,000 more, while at the other extreme, a house could sell for less money than a similar house without a pool if this  not something that buyers feel is useful in that market.

5.                  The appraiser sets the value of the house. 

Some appraisers do a better job than others; however, the appraiser is a reporter and analyzer of data.  The appraiser presents an opinion of market value, but that opinion is supported by data presented in the report.

If you are looking for a REALTOR in Davis or Woodland, California  that can help you sort through conflicting or confusing market information  visit www.discoverdavishomes.com or search homes for sale in Davis or Woodland and then contact me to help you analyze your results.

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