Although the real estate market can be notoriously hard to predict, one aspect of our industry that does seem to follow some sort of consistency is the process of how homes are valued.
While the cost of properties and the market as a whole can absolutely experience turbulence and fluctuation, the method behind establishing a home’s current market value is generally respected across the industry. The reason? All accurate home evaluations are based on a comprehensive and well-established home appraisal process.
Continue reading to learn more about this process and why it commands so much appreciation within the real estate industry.
What is a Home Appraisal?
A home appraisal is a process used to help accurately determine the current market value of a property. Across Ontario and many other real estate markets, only home appraisals completed by professional and unbiased home appraisers are widely accepted as accurate estimates of a home’s current value.
To ensure a home appraiser is educated and qualified enough to produce an accurate and unbiased estimate of a home’s market value, most real estate projects that require a property appraisal also require that the person completing the estimate has a professional home appraiser designation.
Most well-respected home appraisers have one of the Accredited Appraiser Canadian Institute (AACI™) designation and/or the Canadian Residential Appraiser (CRA™) designation.
While helping buyers, sellers, and real estate professionals learn more about a property’s current estimated market value during regular purchase and sale transactions is certainly the primary objective of a home appraisal, they’re also used in a handful of different real estate scenarios too.
Home appraisals are commonly relied upon to help with mortgage refinancing plans, estimated home improvement costs, or to help real estate analysts pinpoint micro and macro market trends via understanding changing property values.
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What Do Appraisals Look At?
In essence, a professional home appraisal does two things: one, it analyzes the current features and conditions of a home via a non-intrusive, visual-only examination; and secondly, it juxtaposes the findings of that visual examination with comparable recent listings and their performance in the current real estate market.
First, a home appraisal will take stock of a property’s assets and amenities — both inside and outside — in order to gain a comprehensive understanding of what’s physically on the property. Among other things, this usually includes features like:
- The square footage and layout of a home
- The number of bedrooms, bathrooms, parking spaces, etc. it has
- A home’s build materials and construction techniques
- The age and condition of a home, including its technical systems and various appliances
- The home’s location and list of nearby amenities
- And the overall size, age, design, functionality, and condition of the home
An appraisal report will include specific notes about each of these aspects, and will also make note of any immediate repairs that should be completed on the home. Things such as cracks in the foundation, faulty or outdated home systems or appliances, or any other unsafe or potentially harmful features will be covered in as much detail as possible by the unbiased appraiser.
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Additionally, a home appraisal will also take into consideration the current and historic sales prices of homes comparable to yours, as well as their performance in your property’s local real estate market.
This way, a home appraisal balances the intuition and expertise of a designated appraiser along with up-to-date performance-based data and statistics on how similar homes to yours are valued by today’s market.
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When You Might an Appraisal
Typically, home appraisals are most commonly used in day-to-day domestic resale purchase and sale transactions.
If you’re a seller, you might want to hire a designated home appraiser before you list your home on the market in order to identify any potential red flags ahead of time that a buyer might find when visiting in person. Additionally, the estimated value given to you from your home appraiser will also influence both you and your sales agent’s pricing plan when determining what to list it for on the market.
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If you’re a buyer, you might want to hire a home appraiser to inspect your potential new home before completing your purchase of it. This more often than not is included as a condition in the Agreement Of Purchase And Sale document, allowing the buyer to have peace of mind about what they are investing in.
As noted above, home appraisals are also regularly used when banks or private lenders are negotiating the terms of a real estate refinancing deal. These ensure that the borrower’s new mortgage isn’t valued more than their current home is worth, according to the value appraisal.
How to Get a Home Appraisal
There are a number of different places and directories you can begin to search for a qualified home appraiser. The most important rule here is that you know how to identify an appraiser with the correct designations. As we previously covered, those with the Accredited Appraiser Canadian Institute (AACI™) designation and/or the Canadian Residential Appraiser (CRA™) can be trusted to conduct a professional and unbiased appraisal.
Additionally, following the advice of trusted online directories such as The Appraisal Institute Of Canada, which lists and promotes designated home appraisers across Canada, is also a good idea.
Lastly, if you’re already working with an experienced and trustworthy Realtor® or real estate agent, they’ll most probably have a list of connections to qualified and designated home appraisers they can recommend to you too.
However you find a home appraiser, it’s always important to ensure they’re fully designated and have an extensive collection of client references and testimonials.
At The Acri Team, we can take you one step further in your search for a qualified home appraiser — we’ll do it ourselves! Receive an accurate estimate of your home’s current market value by a designated member of our team, simply click here to Get A Free Home Evaluation!
