17 Mar

Appraisal FAQs

What is an appraisal?

An appraisal is a formal opinion of value, based on market data ( also known as recent sale data and cost data) that is researched and completed based on the subject property ( your home, cottage, condo, lot). The appraisal is based on 3 approaches to value; the Direct Comparison Approach, the Cost Approach and the Income Approach. , primarily the The Direct Comparison Approach and the Cost Approach are most commonly used for residential appraisals. The direct comparison approach is based on sales similar in age and style as the subject. The Cost Approach is based on the cost to build new, with consideration for depreciation of mechanical, cosmetic, and structural systems of the property. The Income Approach is considered in some instances with residential property, however is primarily considered in commercial situations.

Why do people need an appraisal?

Appraisals are used for a number or reasons, primarily by financial institutions for purchase or refinancing after you have occupied a property. The financial institution is looking for a confirmation of value, and overall condition of the property. Appraisals are also required for purposes of equity division for marital/ common law relationships, estate purposes, family / friend purchasing, or also to verify that the assessment for your property is reasonable and the taxes that are paid are fair for the property that you own.

What is the difference between an Appraisal by a certified appraiser and an Market Analysis from a real estate agent?

An Appraisal is a legal document, which can be used by financial institutions, lawyers, courts, for the intended purpose of your specific situation. It is relied upon in legal matters, to lend money, and can be used to settle disputes. It is a value based on a specific date, and based on the condition of the property at the time of the appraisal ( or secondary determined date). A Market Analysis is used to try to determine what the property may sell for, at a future date, and may include improvements to the property that are not present or completed at the time of the initial inspection.

An appraiser has no vested interest in giving a higher / lower value of the property to encourage commissions, bidding wars, or future business. The value is based on the most recent sale data to determine the present value.

Are appraisers qualified?

All Appraisers must belong to one of two organizations in Canada, and are regulated. All Appraisers with The Appraisal Network are a part of The Appraisal Institute of Canada, which offers a CRA designation for residential appraisers. The CRA ( Canadian Residential Appraiser) designation is the most recognized, respected, and appreciated designation in Canada. Along with the highest education requirements, the founders of the Appraisal Network believe in a strong work ethic and understanding of real estate markets to provide the best report possible for your needs.

I am getting my house appraised – what do I need to do?

The inspection that takes place is simple from the homeowner point of view. The property should be ready for inspection of major elements (access to furnace, mechanicals, electrical panel, and all of the yard site), and be prepared for pictures of the interior and exterior. This does not mean that you need to clean for a week! Breakfast dishes on the counter do not skew the overall condition of the property! What is important is the size, overall condition, and maintenance.
Items that are useful include a survey certificate, tax bill, list of upgrades that may not be visible at the time of inspection. If there has been major repair / upgrading completed, then verification by quotes is beneficial to have on hand for the inspection.

Is there a difference between an appraisal and a house inspection?

Absolutely there is! An appraisal is used to determine the value of the property at a given time, based on sales. While appraisers view all ages/ types of housing on a daily basis, and are familiar with the mechanical, structural, cosmetic features of properties, we are not qualified to determine a cost to repair, or the full extent of any damage / work required in a property. We do use quotes provided by professional contractors to help determine a value for a cost of repair and / or renovation.