Cost and Benefit

One of the biggest flaws in real estate appraisal is that benefits (size of home and features) are included in the appraisal but costs are not. For example, if I own a house out in the suburbs I likely pay a homeowners association fee and perhaps a Community Development District or Municipal Utility District Fee in addition to my mortgage, taxes, etc.. However, if I own a house in an old established neighborhood, let's say a historic area near downtown, I do not pay for anything except property tax. If comparable sale prices for both neighborhoods are the same, and the houses are the same in size and features, then my appraisal for both nieghborhoods will be identical. See the problem? An appraiser would argue that the market will correct the value of the house based on these fees, but let's be realistic. CDD's are created by developers to avoid adding the cost to the home in the first place. Its like going to a fancy restaurant and all you get for $2o is a piece of meat. Everything else is "a la carte." Wether you're in an investor or a homeowner, you will likely be paying these outstanding items forever. If the appraiser saw a huge hole on the side of the house that was going to cost $50,000 to fix (resulting in you making payments on that $50,000 for many years) dont you think the value of the appraisal should be reduced? If you really want to know what the value of a property is then you are ON YOUR OWN. Caveat Emptor (buyer beware).