5 Common Appraisal Myths

The home appraisal can be a nerve-wracking process for many sellers. While most appraisals don't ruin a sale (fortunately!), there are still some persistent myths that far too many sellers believe. Remember: the more you know, the less likely it is that you'll be surprised!

1. The appraiser can tell you what a buyer should pay

An appraisal is only one piece of the puzzle in the art of pricing homes for sale. The appraiser will give an educated opinion on the value of the home based on training and experience, and — if you appraiser is good at what they do — the price will usually be close to the market value, but not always.

So it can be pretty frustrating to find out that the bank won't loan the buyer more money than what the home appraises for. If the home is appraised lower than the offer, either you or the buyer will have to come up with the difference if you want to sell at that price. Many times there is a compromise to be found. The seller comes down on their price a bit, and the buyer puts more money down to make up the difference.

2. An appraisal and home inspection are the same

Wrong — they are very different! As stated in our last blog post, a home inspection is intended to identify issues with the home that everyone should be aware of before money is exchanged, while an appraisal aims to determine the market value of the home. While an appraiser may flag problems that they notice during the appraisal, it is in everyone's best interest to hire an inspector in addition to the appraisal.

3. The more money you invest in a home, the more it will appraise for

This is perhaps one of the biggest myths in real estate. In fact, some improvements may actually bring down a home's value! Many sellers are upset when they discover that they do not get equal value for the improvements they've made to the home.

Overall, the market value of your home is based on what people are willing to pay for it. Take a remodeled garage, for instance. You may have turned it into an HGTV-worthy entertainment room, but the reality is that most people are satisfied with entertaining in their living rooms and would much rather have a garage to park their cars in.

If you are thinking about selling in the next few years, avoid making any upgrades without talking to an experienced appraiser.

4. The assessed value, the appraised value, and the fair market value are the same
There are many confusing real estate terms that seem to be used interchangeably when they shouldn't be, but perhaps none more so than assessed, appraised, and fair market values. Here are their definitions to avoid future confusion:

Assessed value: The assessed value is simply what the local tax assessor believes your property is worth. While a majority of people think there is a correlation to the market value, there isn't! Assessed home values are essentially a yardstick for a city or town to collect a sufficient amount of taxes to cover operational expenses.
Appraised value: The appraised value is the opinion of a qualified appraiser. (That's us!) This value is often sought either during the purchase and sale of a property or during a refinance by an existing owner. Lenders use appraised value as a basis for giving borrowers a loan on a specific property.
Fair market value: The fair market value of a home is the most competitive price a buyer is willing to pay and the lowest price a seller would be prepared to accept. Think of this value as the meeting of the minds of a buyer and seller. Ideally, an appraised value and market value should be similar.

5. A better home guarantees a better price

This is often the hardest pill for most homeowners to swallow. You may have the biggest, most beautiful home in your area, but that does not guarantee that the appraisal price will reflect how exceptional your home is. In fact, standing out too much can even do more harm than good.

Homes are priced based on their area. More specifically, homes are priced based on their neighborhood. The appraiser will consider the size and amenities of other homes in your neighborhood to determine the price of your home. If everyone else has 2,000 square feet of space and laminate countertops, but you have 4,000 square feet and granite countertops, yours will likely be priced somewhat higher, but not nearly enough to get your money back if you have over-improved.

As always, talk to an experienced appraiser before making any major changes to your home. When it comes time to sell, you'll be glad you did.

Appraisals By Michael is a leading full-service appraisal firm with extensive knowledge of the real estate valuation process. We specialize in numerous types of appraisal services, including property (commercial and residential), bankruptcy, divorce, immigration, relocation, and estate matters throughout metro Atlanta's $477 billion real estate market. With 20 years of experience in the real estate market, our appraisers work to provide excellent valuation and consulting services to homeowners, financial institutions, law firms, and accounting firms. Our state-of-the-art appraisal methods allow us to provide customized, detailed reports within 1 to 2 business days, helping to simplify your appraisal experience with accuracy and expertise.

For a full list of services, please visit our Services page. For a list of our coverage areas, please visit our Coverage Area page.

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Posted in:General and tagged: appraisal appraisals by Michael myths

Posted by Anne-Marie Boring on January 9th, 2020 2:19 PMPost a Comment

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Ask Your Appraiser

5 Common Appraisal Myths

1. The appraiser can tell you what a buyer should pay

2. An appraisal and home inspection are the same

3. The more money you invest in a home, the more it will appraise for

4. The assessed value, the appraised value, and the fair market value are the same

5. A better home guarantees a better price

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