Common Myths about Appraisals in the Home Buying Process



Common Myths about Appraisals in the Home-Buying Process

By David S. Bunton


At The Appraisal Foundation, we often encounter misperceptions about the appraisal process in real estate transactions – from how an appraisal is ordered and carried out, to the type of communication permitted with appraisers. As a result, we have compiled the most common myths that we hear from lenders, borrowers, real estate brokers, and homebuilders.

Whether you’re a first-time homebuyer or a real estate professional with years of experience, you may be surprised.

Lenders:

Myth: A lender and an appraiser cannot communicate before, during, or after an appraisal is complete.

Myth: Nothing can be done if a lender has concerns or questions regarding a completed appraisal.

Myth: Lenders must use an Appraisal Management Company (AMC) to order an appraisal.

Myth: AMCs are necessary to ensure that appraisers aren’t influenced by lenders.

Borrowers:

Myth: An appraiser is hired by the borrower.

Myth: The money put into a home translates dollar-for-dollar into a higher appraisal.
o Fact: The cost put into a home improvement project may very well add value to a home; however, the value of any improvements are based on what the market is willing to pay for them, and may not necessarily correlate to the cost. Not all renovations positively impact property values.

Myth: Appraisers set the value of a home.

Myth: Appraisers and home inspectors perform the same function.

Real Estate Brokers:

Myth: Real estate brokers are prohibited from communicating with appraisers.

Myth: Nothing can be done if a broker has concerns or questions regarding a completed appraisal.

Myth: Appraisers request copies of the purchase agreement from brokers simply so they’ll know how much to appraise the home for.

Homebuilders:

Myth: Homebuilders are prohibited from communicating with appraisers.

Myths: Nothing can be done if a builder has concerns or questions regarding a completed appraisal.

Myth: Appraisers only rely on comparable sales and do not take into account the cost to build a home.

David S. Bunton is the President of The Appraisal Foundation.