What is a Home Appraisal For?

How do home appraisals work in Toronto

Home appraisals are utilized for lending purposes, most commonly issued by the lender. In some cases, however, homeowners will commission an appraisal. Let’s take a closer look at what home appraisals are for, and how you can get the highest appraised value possible.

 

What Is A Home Appraisal?

Essentially, a home appraisal is an estimate of value. Depending on the type of appraisal, it is performed to estimate the market value and/or cost value of the home and property. Home appraisals can also be done for lending purposes in order to calculate risk. Generally, appraisals are lender-issued; however, homeowners are beginning to ask for their own home appraisal for various reasons, such as financial planning, to privately sell their home, or as part of a divorce settlement.

 

How Is A Home Appraisal Calculated?

In order to appraise the home, the appraiser uses a formula to discern the value of the home. There are three widely used approaches: Direct Comparison Approach, Cost Approach, and Income Approach.

  • Direct Comparison Approach: This approach utilizes comparable data, such as comparing the property to other properties sold in the area and other market comparables, typically using those which have been sold in the past 90 days. This is most commonly done with residential properties.
  • Cost Approach: This approach examines the estimated cost to replace the property. Then depreciation components, such as physical and functional components, are applied.
  • Income Approach: This approach estimates the income of the property and utilizes various mathematical functions to determine the property’s value.

 

Do Home Appraisals Cost Money?

Home appraisals can cost anywhere between $300-$500. The cost is determined based on the size, value, and location of your property.

 

How Can I Get A High Value Home Appraisal?

There are various things you can do in order to get the best possible appraised value. Let’s take a closer look on how to achieve this.

  • Clean up the property: Whether you have a project in the garage or you’ve been working on building your fence, it is important to clean up your property. Equally as important? Your home. To get a high appraisal value, a clean home is essential. This is more than just a routine cleaning. Going beyond tidying and day-to-day chores, experts suggest things like scrubbing and deep vacuuming your floors and carpets.
  • Keep the curb appeal: If you have an overgrown garden or a bush that needs pruning, now is the time to do it. The appraiser will spend most of their time taking notes and measurements outside your home, plus first impressions matter!
  • Make note of upgrades: It is important to keep a list of any upgrades you’ve done to the house, whether it be new duct work or new copper pipes for the plumbing. When you meet with the appraiser, you can give him or her this list so they are aware of the updates and can use that as a reference to include the value of the work to your appraisal.
  • Brag about your space: If you’re proud of your home, brag. While the appraiser will be knowledgeable of other properties in the area, keep a list of the features that sets your home apart and give it to your appraiser. For instance, in urban areas, yard space is hard to come by. If you live in an urban area and have have a big yard, this is a selling feature and adds incredible value to the home.
  • Know your market: Many experts believe that the key to success is keeping your own comparable data of the area. Depending on where you live, this data may not be readily accessible or easy to find for the appraiser. It is good to keep a list of comparables to help better understand the results of your appraisal.
  • Be careful about spending on upgrades: While upgrading and updating your home may seem like the best step to achieving a high value home appraisal, it can actually end up costing you more money than you thought. That is why it is important to spend wisely. Upgrades such as new paint, carpets, lighting or plumbing fixtures will cost much less than renovating the kitchen or the bathroom.
  • Remember appraisals come in $500 increments: Appraisers take into account any repairs that are needed. Therefore, it is important to remember that appraisers work in $500 increments, meaning that something as simple as a dripping faucet and other such issues like a cracked window could dramatically affect your home’s appraised value.
  • Then versus now: Regardless of when your home was built, your home’s effective age may not reflect that. For instance, if you lived in an old century home that’s 100+ years old, you may have done such significant upgrades and renovations that the effective age is only 5 years.
  • Lend an ear: Rather than badgering the appraiser with questions, be prepared to answer their questions instead. At the end of the inspection, if you have any questions or concerns, you can voice them then.

 

Speak To A Mortgage Specialist Today at MortgageMeister.com

If you would like to learn more about the mortgage approval process and all of the steps needed to purchase a home, contact one of our mortgage professionals today.  MortgageMeister.com is a Toronto-based mortgage broker, helping families purchase and keep the home of their dreams.

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