Getting a property appraised can be a nerve-racking ordeal. There is a lot riding on the outcome of a property appraisal in New Jersey. Many people may be surprised to learn what actually goes into a property appraisal. There are many myths surrounding property appraisal, many of which are completely without basis. These myths include formulaic appraisal misconceptions, market value myths, and the belief that appraisal will change depending on who does the hiring.
There are many reasons to get a property appraisal. In order to sell a home it is required that one goes through with this process. Appraisals are important in this process because they help to keep market prices even. If everyone could list their home for any price they wanted the market would be very uneven and no one would really know what properties were worth. It’s also often required to obtain a property appraisal when applying for a second mortgage or using your home equity for financial purposes.
There is no Formula
One of the biggest misconceptions surrounding property appraisal is that appraisers have some sort of formula that they use to figure a property’s value. Many people have theories that appraisers use some sort of square footage X dollar value = price model. This is simply not true. There is no formula that appraisers use to value properties. While factors such as square footage are certainly a big part of the overall value, they are not tied formulaically to the price. Appraisers take into consideration all the relevant factors such as home feature, location, proximity to amenities, condition, and age.
Each of these many factors can have a big effect on the value or a small effect on the value depending on how dominating they are in the overall view of the property. For example, a home near a small strip mall might not get a big bump for being located near amenities. However the location of a similar home located near a major, new shopping village will most likely carry more weight in its appraisal.
Market Value Myths
Some people believe that the appraised value of a property should be equal with the market value of the property. While this trend is generally true, there are a couple of scenarios where this is not exactly the case. The first is when some remodeling of the interior has occurred and the assessor is not aware. This first example is unlikely to occur because a thorough appraisal will discover this. The second and more likely scenario is that other properties in the area have not been appraised recently. This might mean that the market value for the area is not accurate.
The belief that market value should reflect the replacement cost of a property is a common idea that is not exactly true either. Replacement cost is the price put on creating an identical property while market value reflects what a buyer would likely pay for a property. The difference being that for market value, the buyer is under no pressure to buy the property.
Who’s paying for all of this?
Another common myth regarding property appraisal is that the appraisals often change based on who did the hiring, the buyer or the seller. Some people believe that an appraisal hired by a seller will have a higher price attached to it than one paid for by a buyer. This is a myth and not founded in reality. An appraiser is a professional with no vested interest in whether a property sells and for what price.
There are many myths and confusions regarding property appraisals. These myths are simply not true. Appraisals are objective and thorough, done by professionals in an unbiased way.
