The Myth is: The assessed value of a house equals the market value of the house.
The Fact is: The assessed value of a house is found in the county property tax records. This is established by the county and is used to determine the homeowner’s taxes. The county typically revises the assessed valuation every five years, or so. That value does not reflect the current market value. It’s almost an arbitrary number. The homeowner should not rely on the assessed value as an accurate indicator of what their house is worth.
The Myth is: The appraised value of a house depends on whether the appraisal was done for the buyer or the seller. Some believe an appraisal ordered by the buyer will reflect a lower value, while one ordered by the seller will reflect a higher value.
The Fact is: The seller always thinks the house is worth more, and the buyer always thinks the house is worth less. By the time a deal comes together between buyer and seller, they will usually meet somewhere in the middle. I don’t base my valuations on who hires me. I’m an independent. I pull all my documentation, check the records, and perform an appraisal based on the facts. Falsifying values in this manner is both illegal and unethical.
The Myth is: The replacement cost of a house should be about the same as the appraised value.
The Fact is: There is a section in the report, and that’s the cost. We actually value the house in three different ways: The first of those ways is recent sales approach of homes in the neighborhood. The second way is the cost approach: How much would it cost to rebuild the house? And the third way we value a house is the income approach: In the case of income property, how much money could it earn? Sometimes, the appraised value will actually approximate the replacement cost, but not always. We weigh our valuations on what the market says the house is worth, not on what it would cost to replace it.
The Myth is: You can tell what the property value is just by looking at the outside. The appraiser looks at one house, then looks at another nearby house, puts the numbers together, and bingo! That’s the value of the subject house.
The Fact is: I take quite a few more steps. I look at the neighborhood, the location, the square footage of living space, whether it has a garage, carport, patio, pool, spa, upgrades, and the condition of the home, both inside and out. And I also look at the public records. There’s a lot more involved than just driving by the property and juggling some numbers.
The Myth is: An appraisal and a home inspection are the same thing.
The Fact is: No. The home inspection person checks the house construction, looks for insulation, looks at the plumbing, and determines whether things are up to code, and so on. He is not attempting to determine the value of the house. An appraiser’s job is to establish its actual value. They are quite different tasks. The home inspector might be at your house for four hours. I might be there an hour or less. But it’s very likely I put in at least two hours’ work doing research before my visit, and a couple more hours afterwards, writing my report.