Common myths about appraising

It is required by law that a real estate appraiser is required to be state-licensed to write appraisal reports for federally-related home purchases in Hawaii. You have the ability to acquire a copy of the completed appraisal from your lending agency. Contact us if you have any concerns about the appraisal process.

Myth: Market value must be the same as the assessed value of the property.

Fact: It is probable that Hawaii, like most states, supports the common myth that the assessed value equates to the market value; however, this is not often the case. Interior remodeling that the assessor is not aware of and a lack of reassessment on nearby properties are perfect examples of why the price can vary.

Myth: Depending on whether the appraisal is provided for the buyer or the seller, the value of the property will vary.

Fact: There is no vested interest on the part of the appraiser in the outcome of the appraisal, therefore he will conduct his work with impartiality and independence, regardless for whom the appraisal is written.

Myth: Any time market value is found, it should be similar to the replacement cost of the house.

Fact: Without any influence from any outside parties to buy or sell, market value is what a willing buyer would pay an interested seller for a particular property. Replacement cost is the dollar amount required to rebuild a house in-kind.

Myth: There are certain methods that appraisers use to find the cost of a property, such as the price per square foot.

Fact: An appraisal report is a collection of data concluded from the home's size, location, proximity to some facilities, the condition of the house and the cost of recent comparable sales. You can rely on REID E. CHOATE & ASSOCIATES, LLC's staff to be ethical in assessing this data.

Myth: In a strong economy - when the costs of houses in a given region are reported to be increasing by a particular percentage - the prices of individual houses in the vicinity can be expected to increase by that same percentage.

Fact: All increase of value is on a one-on-one basis, found by data on relevant considerations and the data of comparable properties. It makes no difference whether the economy is excellent or poor.

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Myth: The property's exterior is determinate of the actual price of the home; it is unnecessary to do an interior inspection.

Fact: To find an accurate value beyond all doubt, an appraiser must examine the home on a variety of factors based on area, condition, improvements, amenities, and market trends. There's no real way to get all of this data from just looking at the property from the exterior.

Myth: Because the consumer is the one who puts up the money to pay for the appraisal report when applying for a loan for any real estate transaction, legally the appraisal is theirs.

Fact: The document is, in fact, legally owned by the lending company - unless the lender "releases its interest" in the appraisal report. Due the Equal Credit Opportunity Act, any consumer requesting a copy of the report must be provided with it by their lending company.

Myth: Consumers need not worry about what is in their appraisal document so long as it exceeds the necessities of their lending institution.

Fact: Only if home buyers look through a copy of their appraisal report can they double-check its accuracy and possibly need to question the result. Remember, this is probably the most expensive and important investment a consumer will ever make. An appraisal can serve as a record for the future, since it contains a great deal of information - including, but certainly not limited to the legal and physical description of the property, square footage measurements, list of comparable properties in the neighborhood, neighborhood description and a narrative of current real-estate activity and/or market trends in the area.

Myth: The only reason someone would order an appraisal is if a property needs its cost estimated in a lender sales transaction.

Fact: Ordering an appraisal can fulfill a variety of requirements depending on the designations and certifications of the appraiser involved; appraisers can provide a variety of different services, including benefit/cost analysis, tax assessment, legal dispute resolution, and even estate planning.

Myth: A house inspection serves the same purpose as an appraisal.

Fact: An appraisal report does not fulfill the same purpose as an inspection report. The job of the appraiser is to arrive at an opinion of value in the appraisal process and through creating the report. A home inspector assesses the condition of the building and its main components and reports their findings.