When looking through Milton homes for sale listings on some of the best real estate websites in Canada, one common phrase a buyer comes across is ‘property appraisal.’ But what does it mean, and why is it essential?
Property appraisals are impartial estimates of a property’s worth conducted by authorised third-party appraisers. Financial institutions offering mortgage loans often ask for appraisals to verify that the property’s market value aligns with the purchasing price.
In Real Estate Canada, appraisals are generally mandatory for buyers with uninsured mortgages or low-ratio buyers who make down payments of 20% or more toward their home purchase.
On the other hand, an appraisal might not be necessary in cases where your down payment surpasses your loan amount or if you are already insured by the Canadian Mortgage and Housing Corporation (CMHC) by having down payments of less than 20%.
Despite these conditions, an appraisal is likely needed if the property’s value is uncertain and the lender doubts the purchase price’s validity in relation to the property’s actual value.
Though the lender commissions the appraisal, the buyer usually bears the cost, which generally falls within the $350-$500 range.
However, this varies based on the mortgage provider chosen. Some of the top five banks in Canada and certain mortgage brokers offer to cover the appraisal cost as a part of their service.
The Appraisal Process
The appraisal process begins once your offer to purchase a property gets accepted. Below are the key steps involved:
Scheduling the Appraisal:
The lender initiates the appraisal, after which the appraiser arranges a suitable time with the listing agent to inspect the property.
The appraiser probes into the property’s age, recent upgrades, the condition of critical elements like the roof, and strata-related information. The appraiser usually takes pictures of the property’s interior and exterior for record-keeping.
Post-inspection, the appraiser conducts a comprehensive review of comparable properties recently sold or relevant properties. After gathering all necessary information, the appraiser reconciles the data in their report to ascertain the property’s fair market value.
The Final Report:
The appraiser forwards a copy of the report to your lender. It’s crucial to communicate with your mortgage broker or professional to understand whether your purchasing price value is justified, as you may or may not receive a copy of the appraisal report.
The appraiser’s core duty is to gather data for assessing a property’s current value, employing two essential methods:
- Property Evaluation:
This involves analysing the property’s dimensions, condition, upgrades, location, and overall appeal. They consider factors like maintenance, age of components like the roof, and strata details, if applicable.
- Comparable Analysis:
The appraiser studies the area’s recent ‘comps,’ or comparable sales. They adjust based on each property’s strengths and weaknesses compared to yours, using public records for price verification. Past appraisal experiences also play a role.
Ultimately, the appraiser aims to confirm if your property’s price aligns with market trends and buyer willingness for similar properties.
Low Appraisal: What Next?
Faced with a lower appraisal than you expected?
If the appraised value falls below the selling price, the bank releases funds based on the appraisal. To proceed with the purchase, you can choose one of the following options – contesting the assessment, seeking a second opinion, or adjusting your down payment.
In addition, your mortgage broker might dispute the appraisal or consider a second appraisal or a different lender. You can also borrow or increase your down payment to cover the difference.
Safeguarding Against Low Appraisals
Protecting against low appraisals involves proactive steps. Your realtor should provide comparable sales upfront to justify your offer price. The listing agent’s involvement is vital, educating the appraiser about property benefits and upgrades. Keep a contingency fund for unexpected real estate surprises. Engage an experienced realtor who understands the market, preventing low appraisals and guiding you through the process efficiently.
Understanding property appraisals is critical when hunting for your dream property, whether Toronto or Milton homes for sale. As you navigate the best real estate websites in Canada, remember that an appraisal is not just about putting a price tag on a property. It safeguards your investment and ensures that you are making a fair deal.
As you journey to find the perfect home, remember the significance of property appraisals. They are about value, ensuring a fair deal, and protecting investments. With this knowledge, you are one step closer to finding your dream home.