Appraisals are one of the essential ingredients required in all property transactions. Whether you’re buying or selling, you will need an appraisal to estimate how much you will sell the property for, or for your lender to base their lending decision on. The following are the most important pieces of knowledge needed to get a quality appraisal done.
Reasons to get an appraisal
A professional appraisal can help sellers determine the most appropriate asking price when listing a property. As a buyer, an appraisal can assure you that you’re not spending or offering too much for a house. Appraisal’s are also needed when seeking mortgage financing. Lending companies use appraisals to determine how much they are willing to lend.
When to call an appraiser
Call an appraiser when you are concerned that you may be paying too much for a property. This will eliminate any fears you may have of over-paying for a property. If you are getting a mortgage, the lender will usually order the appraisal, because they want to choose the appraiser and have the appraisal done by an independent third party, eliminating any conflict of interests that could arise if the borrower ordered the appraisal themselves. When selling a property, you can usually avoid the appraisal fee by having a market analysis done by 1-3 real estate agents.
Hiring an appraiser
If the appraisal is needed for mortgage purposes, check with your lender, they will have an approved list of appraiser’s that they use. If the appraisal is for other reasons, word of mouth is a good way to find a good appraiser. Ask your real estate agent for suggestions on good appraisal companies. Although all certified appraisers must be liscensed with the Appraisal Institute of Canada (www.aicanada.ca) the designation does not guarantee competence. If possible find a personal recommendation.
What the appraisal includes
An appraisal will include a visual inspection of the property, the approximate age and condition of the house, the number of bedrooms and bathrooms, the condition of amenities and more. Different from a home inspector which inspects the structural integrity of the house, an appraiser looks for various features of the house. The appraiser will estimate the value of the house based on one of two approaches: 1) what the cost would be to construct the same home (including land) or 2) by comparing the house to other, similar homes in the area that have sold recently. Many appraisal companies will not include certain information unless specified, things to look for that can be important on an appraisal are listed below:
- Letter of transmittal
- Days on market of direct comparisons
- MLS numbers of direct comparisons
- Sketch page to support the size of improvements
- Pictures of direct comparison sales
- Square footage of direct comparison sales (usually available)
- Minimum of previous 5 years subject sales history
- Map showing the subject location
- Map showing the direct comparison locations and distance from subject
- Numerous pictures of interior as well as front, rear, and street photos
- Pictures and narrative on negative influences on value
The appraisal report
The appraisal will have the address of the property, a description of the neighborhood, including factors like property value trends, and a description of the lot. The report will also include details such as; number of rooms/bathrooms, exterior and interior description, materials such as carpet, hardwood floor etc., utility systems such as heat, air conditioning, natural gas lines, kitchen and bath amenities, description of garage, and so on.
Using an independent appraiser
An independent appraiser gives an unbiased opinion of what the value of the property is. An independent appraisal is similar to a market analysis completed by a realtor, the main difference being the unbiased approach. An unbiased appraisal can also be a good negotiating tool. An appraiser can theoretically tell you what the value of the property would be with additions, such as another bathroom or an updated kitchen.
Home Loan Direct lends across Canada, specifically, but not limited to the Greater Toronto Area (GTA):
Toronto, Thornhill, Vaughan, Woodbridge, Richmond Hill, Scarborough, Etobicoke, Aurora, Newmarket, Markham, Stouffville, Unionville, Pickering, Ajax, Whitby, Oshawa, North York, East York, Oakville, Muskoka, Niagara, Guelph, Windsor, Barrie, Mississauga and Hamilton.
Other major cities in Canada include: Vancouver, Victoria, Edmonton, Calgary, Saskatoon, Regina, Ottawa, Montreal, Fredericton, Halifax and St. Johns.
