Most tasks having to do with buying or selling a home can be pretty stressful, from finding the house of your dreams, to securing the financing, all the way through to closing. But for most transactions, everything, absolutely everything, hinges on the home appraisal. This is probably why so many myths and misconceptions have grown up around the process. We’re here to help you sort the truth from the stories.
Myth #1: Home Appraisals and Home Inspections Are the Same
This couldn’t be further from the truth. The sole purpose of a home appraisal is to determine the value of the home, in that moment, in those market conditions, in the shape that home is currently in, for the purpose of securing a mortgage to buy that home. A home inspection, on the other hand, determines the condition of the home, along with any major defects, in the moment when it’s being inspected, usually for the purpose of finalizing the purchase of that home.
The waters get muddied when buyers are securing FHA, VA or USDA loans, which require an additional loan-specific inspection be performed by the appraiser. This particular kind of inspection is there to ensure that the home meets the loan’s minimum standards, not to determine the overall condition of the home. Always have a home inspection, to prevent surprise maintenance and/or replacement issues of key systems after you purchase the home and they become your responsibility.
Myth #2: Home Appraisers Create Market Values
Although the home appraiser will assign your home a rough value, the work they do is actually based on a thorough study of the current real estate market’s conditions, the condition of the home, the value of each component of the home, the value the neighborhood contributes, and a myriad of other factors, as well as the fact that a buyer was willing to pay the amount of your contract for the home. The appraiser compares the home being appraised to other homes currently on the market or recently sold to come up with the approximate value of the home for the purpose of securing a mortgage.
So, while any individual home appraiser could be considered to be contributing to market values, they in no way set them. You can think of them more like a reporter, simply telling the story of your home and the things in it, for better or for worse. They appraise homes every day and understand what a dollar will buy in their particular markets.
Myth #3: If You’ve Had an Assessment, You Don’t Need an Appraisal
While an assessment is a type of valuation of a home for the purposes of determining tax responsibility, they don’t go into the kind of depth an appraisal does. Do you remember the last time someone went onto your property and into your home to perform a tax assessment? Of course not, because they’re simply not that thorough. Tax assessments have to be done quickly due to the sheer number performed at once, so they are often painted with a very broad brush.
Appraisals, on the other hand, can each take several hours, including the time the appraiser is on site examining the home’s interior as well as the exterior. This is why when someone believes their assessment to be incorrect, they can challenge it using a home appraisal. The appraisal is simply more accurate. Never use an assessment for sales or purchase purposes, or you’ll be sorely disappointed.
Myth #4: The Appraiser Is on the Bank’s Side
An appraiser is a neutral third-party expert who is contracted by banks to determine the value of your home so they can use this figure in making your loan. This doesn’t mean that appraisers are working on behalf of the bank or that they’re simply there to make the numbers work out every time. Sometimes, appraisers come back with very bad news about homes, determining that they absolutely cannot be appraised for the transaction price, or that there’s something about them that means they cannot meet the minimum requirements of a given loan type.
When It’s Time to Buy a Home…
Although you can’t pick your appraiser, you certainly can choose the bankers you work with who will help you make the best financial decisions about your future home as possible. When you’re not sure who to call, call on your real estate professional to ask for the very best financial professionals available.
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