A home appraiser’s work is to estimate a home’s current value while considering market conditions, the condition of the home, and comparable homes. The bank typically requests a home appraisal to ensure that what they spend on the home is recoverable -should the lendee default.
If you are buying or selling a home, below is what you need to know about what home appraisers do when you’re buying, selling, evaluating, or looking to unlock equity in your home.
Quick take: What do home appraisers do?
- Appraisal reports are sent directly to the bank or the individual who ordered it.
- Buyers and the bank do not have a legal obligation to share the results of an appraisal with the seller.
- The buyer may request a copy of the appraisal from the bank.
- The cost of a home appraisal depends on the size of the property, labour, and location.
- An appraisal may take several hours, and you get the report within a week or a few days.
- An appraisal contingency is a safe way out of a contract if an appraisal comes in higher or lower than expected.
How much will a home appraisal cost in Alberta, and who pays for it?
In Alberta, a home appraisal will cost the buyer anywhere from $200 to $700 or more. The cost varies depending on location, the size of the home, and the labour required.
How does a home appraisal work?
A home appraisal is, in theory, an unbiased professional opinion on the value of a home. Unlike Comparative Market Analysis, a registered home appraiser conducts the exercise. In Alberta, whomever orders a home appraisal and pays for it has access to the report. They can then choose to share the information to prospective buyers or lenders.
In other words, if the contract requires the seller or buyer to pay for an appraisal, that individual may get a copy.
What usually happens is the buyer pays for a home appraisal. If the buyer pays, the seller is not entitled to the report.
What is comparative market analysis?
Like a home appraisal, Comparative Market Analysis is a professional opinion on the value of a home. The critical difference is real estate agents conduct CMAs. A comparative market analysis is considered less trustworthy in the eyes of banks or lenders. If you want to unlock equity in your home or utilize a Swift Sale, you will need to get your home appraised by a registered appraiser.
What to remember:
- A home appraisal protects the lender from lending too much, and it assures them that the house is worth the amount they are loaning out.
- The borrower pays for an appraisal.
- Local laws require appraisers to give unbiased opinions.
Book an Appraisal.
What do you get after a home appraisal?
After a home appraisal, the individual or institution that requested it receives an appraisal report. In Alberta, a home appraisal report should contain:
- A sketch of the property.
- Street map detailing the subject property and comparables.
- An explanation of how the exercise was conducted and factors considered.
- Photographs of the subject property and comparables.
- Market data information.
However, the report depends on the type of appraisal requested.
What do appraisers look at the most?
To estimate value, home appraisers look at:
Comparable home sales (Location/Market)
Recently sold homes in the neighbourhood give insight into the value of the subject property. What an appraiser typically does is find similar properties within a one-to-two-mile radius in the same area, factors in the differences and similarities, then estimates the value of the subject property.
“Comparable” means similar in terms of function, use, utility, and style.
That means you cannot compare a commercial property to a residential home.
The home’s exterior and interior condition
The home appraiser will take pictures and create sketches of the home’s exterior and interior floor plans. Drive-by appraisals only require the appraiser to look at the home’s exterior.
Consequently, it is vital to ensure that the home appraiser understands the scope of the assignment.
Living space and the size of the home
From curb appeal to outdoor living spaces, the appraiser must consider all factors that add value to the home.
It is worth noting that not all upgrades or extensions will add value to your property. Consequently, we recommend consulting with a real estate agent before paying for upgrades or home improvements.
Square footage and the number of rooms also have an impact on the value of a home.
Tip: Sweetly offers a no interest improvement budget when you choose to list with us.
Your neighbours and surroundings
Your neighbor’s home may influence the value of your property. Issues including boundary disputes, junk, loud animals, or bad neighbours -may lower the home’s value.
Special Features
Is your house green? Energy Efficient? Does it have a well-maintained pool? Any feature that your house has may be considered in an appraisal.
When is an appraisal ordered in the loan process?
An appraisal can be done at any time, however it is usually only valid for ~90 days due to changing market conditions. In the loan process if a home appraisal is required, it will need to be done before the deal closes.
Loan processing and appraisal: What to remember
- A home appraisal affects the buyer’s ability to get a loan.
- The parties may renegotiate or cancel the deal if the home appraisal is higher or lower than the offer (if the contract allows it).
- If the appraisal is too low, the lender may pull out.
- You have the option to find another lender if your current lender pulls out because of a bad appraisal.
- If you put down less than 20% as a down payment, you may have to pay mortgage insurance (consult with your lender).
- You may make a larger down payment if the appraisal comes in low to avoid lender pullout.
Home appraisal checklist for sellers
If you are selling a home or property, it is in your best interest to make as much as you can from the sale. To that end, there are several steps you can take to increase the value of a home.
You cannot control market conditions, but you may increase your property’s value by doing the following:
- Replace and repair. Door handles, carbon monoxide and smoke detectors, windows, and so on should be in good condition before a home appraisal. If you or the buyer paid for a home inspection, the home inspection report should contain recommendations on what needs repairs and replacement. We recommend making repairs before a home appraisal.
- Curb and interior appeal. Clean and declutter. You want the home to be as appealing as possible before a home appraisal.
- Upgrades and improvements. If you have made recent upgrades and improvements, keep the receipts, and inform the appraiser. You may also provide copies of a recent appraisal.
How long does a home appraisal take?
An appraisal will take anywhere from thirty minutes to a few hours to complete. You may get a report within a week or several days, depending on the appraiser.
When is an appraisal ordered in the loan process?
Before closing and after the parties sign a contract.
To protect yourself from a high or low appraisal, it is recommended that you include an appraisal contingency in the contract. An appraisal contingency gives either party a safe legal way out -should the appraisal come in low or high.
If you do not include a contingency, backing out of the deal without good reason could be grounds for a lawsuit.
How does a home appraiser determine the value of a home?
During a home appraisal, a home appraiser will do the following
- Inspect the home’s interior and exterior. Some appraisers may only look at the exteriors.
- Appraise amenities and additions.
- Photograph, sketch and record the layout of the home’s interiors and exteriors.
- Find safety code violations if it is within the scope of the assignment (a home appraiser may inform you of serious zoning violations, but code violations are not within their work assignment).
Do you need a home appraisal when buying a house?
If you are buying the home via a mortgage, yes. Your lender will require a home appraisal before approving lending. Cash buyers do not need a home appraisal, instead you may ask a REALTOR® to conduct a Comparative Market Analysis.
A CMA is not as accurate as a home appraisal, but it can give the seller a range within which to sell the property.
What is the difference between a home inspection and a home appraisal?
A home inspection is an assessment of the current condition of a home. Its purpose is to inform the buyer of any issues that may exist, including zoning/code violations, problems with the roof or foundation, what needs to be repaired/replaced, and so on.
A home appraisal, as mentioned, seeks to find the current market value of a property.
Does the appraiser work for the lender or buyer?
Appraisees work for the individual who orders an appraisal. It could be the buyer, seller, or buyer’s lender.
The buyer’s REALTOR® and the home appraiser attend the home appraisal. It is good practice for the homeowner not to attend a home appraisal because it gives the appraiser more freedom to do his job.
Are home appraisals accurate?
If conducted by an experienced professional, a home appraisal should reflect the home’s current market value. What is vital to remember is that a home appraisal is a professional opinion, meaning different appraisers may come up with varying estimates.
To avoid the need for a second appraisal or opinion, you should:
- Hire an experienced appraiser.
- Make sure that the appraiser understands the scope of the assignment.
- Error-check the appraisal report with the help of a REALTOR®.
