There’s a lot of misinformation out there regarding appraisals. Here is the truth behind some of these commonly believed myths.
Today we’re going to be discussing the three most common misconceptions people have about appraisals:
1. What an appraisal actually is. Most people think an appraisal determines a home’s fair market value. That’s incorrect. An appraisal is actually a valuation of the property that determines how much money a bank is willing to lend against a property. The appraised value is similar to the fair market value, but varies by a few percentage points. Whether or not the appraised value impacts the transaction depends on a few things, including the price agreed upon by the buyer and/or seller.
2. The buyer chooses the appraiser. It’s commonly thought that because it’s the buyer’s appraisal report or because the buyer’s lender is hiring the appraiser, somehow the buyer decides which appraiser appraises the home. The lender actually hires a 3rd party company, who hires one of their own appraisers to appraise the property. Nobody in the transaction has a say on who that person is going to be. It’s a completely neutral 3rd party.
3. The appraisal is only a recommendation on price. The appraiser, even though the inspection has been completed, can recommend that certain repairs be made in the home for health and safety reasons. There are things other than value that the appraiser is looking for, so don’t be caught off guard by additional repairs that might be recommended.
If you have any questions about this topic or about anything else related to real estate, don’t hesitate to give me a call or send me an email. I look forward to hearing from you soon.