Home Appraisals

Posted by:Aleksandra Oleksak

home appraisals

When purchasing or refinancing a home, the bank and/or mortgage insurer always perform an appraisal on the property. Before lending you any money, they want to ensure the home is worth what you purchased it for or what you are claiming it’s worth, which makes sense, right? Especially in markets like Toronto, where you have multiple offers and people get excited bidding over the purchase price of the home. It’s always important to keep in mind, as my mortgage broker Jake says, “appraisers do not ever appraise what the property can sell for, but what comparables show it would have sold for – key difference.” So how are these appraisals done, what do they cost and who pays for it? Let me break it down for you with some general information so you have a better understanding.

3 Types of Appraisals:

Automated Valuation Model (AVM)

  • The automated valuation model is done on the computer
  • Quickest way for an institution to do an appraisal on the property
  • Most cost effective way
  • Done at no cost, but some lenders do charge from $75-$100
  • Not the most accurate
  • Doesn’t take into account attributes of the particular property
  • Criteria is very simple

Drive By Appraisal:

  • The appraiser goes out to look at the property, “drive by” but doesn’t go inside the home
  • Appraiser may take pictures and verify the home’s existence and resemblance
  • Appraisal may last a few minutes and the owner does not have to be home
  • Rest of analysis is done by real estate records by analyzing home and neighbourhood assessments & looking at comparable properties that have sold
  • More cost effective then a regular appraisal, approximately $200
  • Cost may be absorbed by the bank or buyer or owner in the case of a refinance
  • Doesn’t give the appraiser an opportunity to see what’s going on inside the home, upgrades, damages, etc

Full Appraisal:

  • The appraiser books a date and time with the homeowner to go inside the property
  • The appraiser examines the interior and exterior of the property
  • They may take pictures, measurements and ask the homeowner questions about the property or any upgrades
  • Appraisal usually last about 15 minutes depending on the size of the home
  • Cost is approximately $275 and up
  • Cost may be absorbed by the bank or buyer or owner in the case of a refinance
  • Most common method used recently, especially with so many bidding wars happening in Toronto
  • Gives the most details about the property when compared to the other 2 types of appraisals

When buying a home, appraisals are part of the process for obtaining financing on a home and if your offer is conditional on financing, make sure to leave yourself enough time to fulfill this condition. NEVER waive a financing condition if the bank/institution is requesting an appraisal to approve your financing. Why you ask? There is a chance your appraisal may come in low, but to find out your options in this case, you’ll have to come back for Part 2 of this post.

PS. Thanks so much to Mortgage Jake for taking the time to answer my questions on appraisals, so that I could share accurate information with all of you!

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  1. Pingback: Low Appraisal | Realty Queen TO | Toronto Real Estate Agent | The Junction Toronto

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