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Don’t Rely Excessively On Appraisals

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                      Don’t Rely Excessively On Appraisals

Getting an appraisal on a home is a fundamental aspect of making a purchase. While
appraisals are certainly helpful, you should not put too much stock in them.

Don’t Rely Excessively On Appraisals

An appraisal is a valuation of a property by an independent appraiser. The appraiser does an
evaluation of the home, considers the home in comparison to others of comparable type and
so on. Once completed, the appraiser then issues a written appraisal value of the home. Many
homebuyers make the assumption the appraisal is the true value of the home both now and in
the future. This can be a dangerous assumption.

First, appraisals are limited by something known as a moment in time. The appraisal done
today, may not be entirely relevant a month or two later. If a property has been on the market
for a few months, the appraisal may not reflect a slowing market. This, in turn, means the
appraised value is actually higher than the current market will support. Homebuyers run into
problems when this occurs because they put too much value on the appraisal. A seller will
often list the home below the appraised amount and homebuyers will think they are getting a
deal. In reality, they are not and may actually be paying more than a new appraisal would
support. The older the appraisal, the less value you should put into it.

Most homebuyers assume an appraiser inspects the home for defects and discounts the value
of the home accordingly. This is not really the case. An appraiser is not really doing a critical
home inspection. In fact, the appraiser contract and/or report usually contains a long
disclaimer whereby the appraiser covers his derriere by noting he assumes the property is in
good condition and isn’t liable if it is not. Obviously, that should scare you. This, of course, is
why you should insist on a home inspection for any property you make an offer on.

An appraisal is a solid part of the equation when considering a home purchase. It is not,
however, the piece de resistance when valuing the property.




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