Comparing your home to recently sold homes in your neighbourhood is the easiest way to estimate its current value. To get a general value of what your home is worth, you can use Sweetly’s Instant Home Valuation tool. However, if you would like an actionable value that you can use for a Swift Sale or to unlock equity in your mortgage, we recommend getting an appraisal.
That said. Below is what you need to know about home valuations in Alberta, Canada.
Quick take: Property valuation in Alberta
- A home appraisal is a professional opinion of estimated market value. If you disagree with the findings or want a more accurate estimate, you may get quotes from multiple evaluators.
- Home renovations may or may not increase the value of your home. If you want to sell your home, when you list with Sweetly, we offer an improvement allowance with our Listing With Confidence to ensure your home shows its best before the sale.
- The market value of your home and the assessed value are interconnected. Therefore, if you make some improvements, the home’s value may be higher than the market value of similar homes that do not feature the upgrades.
- You may estimate the value of the home using square footage and compare it to nearby homes that have recently sold.
- Property taxes vary based on location and the size of the property.
- The ultimate decider is what buyers are willing to pay for the property. Consequently, it is in your best interest to make the home as attractive to buyers as possible. That entails improving curb appeal, cleaning the home, adding a new coat of paint, and so on. Until a home hits the market and buyers decide what it is worth, you are only dealing with estimated market value.
- A combined valuation approach is the best way to get fair market value for your property.
- If you disagree with a valuation report in Alberta, you may get a second opinion or report to the Appraisal Institute of Canada (see link below).
- Location, age, and crime rates impact the value of your home.
How much is my home worth in Alberta?
Property evaluators in the province of Alberta rely on three approaches to estimate property value.
(1) Comparison approach.
(2) Cost approach.
(3) Component approach.
Property valuation guide Alberta: Sales Comparison Approach (SCA) or Comparative Market Analysis (CMA)
If you reside in the suburbs, your home or property is likely very similar to most homes in the neighbourhood.
SCA or Sales Comparison Approach or Comparative Market Analysis is an appraisal method that compares your home to recently sold homes in the neighbourhood. The factors that affect the property’s value include geographical location and the age/condition of the home. Other factors include square footage, amenities, and features.
Sweetly’s instant home valuation tool uses a combination of approaches to determine the appropriate value for your home. Sweetly can also have one of our local REALTORS® provide you with a free comparative market analysis or send a qualified local appraiser to view your home for a more accurate valuation.
When it comes to geography and location, the average price per square foot varies depending on factors, including the crime rate in the area, amenities, access to schools and shopping centers, and other necessities. In other words, a home similar to yours may sell for a higher or lower price if it is located in a different geographical location in Alberta.
How to conduct a sales comparison approach in Alberta
What does your home have in common with properties recently sold in your area? If the square footage and features are similar, the next question is, have you made any improvements to the home? What is the current condition of the home?
If the home is in good condition and you have made little to no improvements, the home’s value will likely be similar to recently sold properties in the area. So the question is, why do some homes sell for a lower price?
Factors that decrease property value in Alberta
- Natural disasters. If the home is in a flood zone, an area that experiences forest fires, or areas prone to disasters. The home’s value will be lower than a similar property located in a relatively “safe” neighbourhood.
- Crime rates. Homes in areas with high crime rates usually sell for a lower price.
- Foreclosures will impact the price of properties in the neighbourhood by skewing comparative sales in the area downwards.
- Current mortgage rates.
How nearby should a comparable property be to the subject property?
When employing the sales approach, the comparable property should be as close to the on-sale home as possible, preferably within the neighbourhood.
How to increase property value in Alberta
You may list your home or property “as-is” or improve the house and sell it at a higher price. If you make some improvements to your home, such as increasing square footage, modernizing the home, or adding other features. The added features may increase the value of the home.
Note that making home improvements does not guarantee a higher sale price, so we recommend making improvements within your budget.
What is the cost approach method in Alberta?
In the real estate industry, the cost approach method asks one question.
How much would it take to build a similar property?
The factors considered include the price of land in the area, materials used, the home’s features, and depreciation. If you are looking to sell a new home, or if you are constructing one. The cost approach method is the easiest way to estimate your property’s value.
There are two types of cost approach appraisals in Alberta
(1) The replacement method.
(2) Reproduction method. The replacement method as the name suggests asks, how much would it cost to replace the asset using current construction methods and newer materials?
The reproduction method asks; how much would it cost to reproduce the home using newer construction methods and materials?
Remember, the value of land in a neighbourhood is fairly constant (taking into account positives such as a views or negatives like a busy street or highway).
What a property evaluator will do using both methods is.
(1) Deduct the cost of depreciation from the cost of the home.
(2) Add the current value of the land to get the value of the property.
What are the advantages of the cost approach method in Alberta?
The problem with the cost approach method is that the evaluator may make certain assumptions, and the lack of similar homes or properties to compare to -may impact accuracy.
The cost approach is beneficial in that evaluators may use it to appraise new construction, commercial properties, or special purpose properties. n short, if you do not have a similar property to compare your home’s value to, using the cost approach method is the best option.
The component approach method
The component approach requires the appraiser to assess the value of components separately. After getting the cost of land, add it to the cost of the home, and structures on the property. The value of land does not depreciate, but the value of the home, garage and other structures on the property will rise or fall depending on the condition, age, and the improvements you make.
The value of land is impacted by several factors, including shape, location, potential hazards, distance from amenities and schools, size, and environmental risks.
To make the land more attractive to investors, you may make improvements.
What is the most accurate home appraisal site in Alberta?
A combined approach is the most accurate home appraisal method. Why?
A combined approach, as the name suggests, combines all the methods above to give you a more accurate estimate.
Sweetly’s home sales process is a three-step process that starts with:
(1) A property appraisal conducted by experienced local appraisers.
(2) Choose the day you want to move
(3) Accept our offer or list with us. Either way, you’re in control!
How often do home/property values change in Alberta?
The reason you need a hands-on approach when it comes to appraisals is property prices in Alberta change frequently. Depending on local laws, and current market trends, the value of your home may change on an almost monthly basis. That makes it vital to hire a reliable property evaluator and REALTOR®.
How home appraisals work in Alberta
The appraisal process in Alberta begins with a property assessment. At this stage, the appraiser determines the most suitable appraisal method or a combination. Depending on the age, condition, and location of the home. The appraiser may use the comparative method, the component approach, or the cost approach method.
After getting the estimated value of the home, the appraiser will consider the following factors:
- Improvements made to the home. As mentioned, some improvements add value, and some do not. What is vital to remember is that if you make too many improvements or unnecessary improvements, you may end up selling at a loss. We therefore suggest making improvements that add value. Consulting with a REALTOR® may be beneficial to determine the best areas to spend on home improvements. (Best Value Home Renovation Projects)
- How much will it cost to rebuild the home using current construction methods and newer materials?
Note: An appraisal can only be deemed reliable if it is recent and reflects the value of today’s market.
How is the fair market value of real estate calculated for tax purposes in Canada?
According to Canada’s revenue agency, fair market value refers to quote:
“The highest price, expressed in terms of money, that a property would bring, in an open and unrestricted market, between a willing buyer and a willing seller who are both knowledgeable, informed, and prudent, and who are acting independently of each other.”
That means after a property valuation, the estimated value of your home should reflect current market conditions, and it should be based on evidence.
That raises the question:
How do I avoid property valuation scams?
Where did you meet your valuator?
Warning signs that a property valuator may be a scammer include being approached by telemarketers or door-to-door salesmen.
What happens during an appraisal scam is that “the appraiser” deliberately assesses your house’s worth at an inflated price or a price that is higher or lower than its fair value. So be careful with appraisers who make unrealistic promises.
To avoid a fraudulent appraisal, we recommend:
- Work with a reliable local property appraiser.
- Investigate the property before you invest. Do not send money to telemarketers or door to door appraisers.
- Make sure that the appraiser is a licensed professional.
- Check the appraiser’s reputation online or ask for references from other property owners in your area,
- Use the Appraisal Institute of Canada to Report Appraisal fraud.
Note: Sweetly only works with independent local Appraisers.
What to do if you receive an inaccurate appraisal in Alberta
For sellers. If you receive an inaccurate appraisal, you may hire another appraiser to get a second opinion, or you may request a copy of the appraisal report. The idea is to check the document and find errors or reasons for the low figure.
If you are sure that the appraisal is erroneous you may appeal the report by providing evidence (comparable properties) or getting a second opinion.
