Home appraisals often play a crucial role in Canadian real estate transactions, ranging from mortgage approvals to determining a fair price for your home and even resolving property tax assessment disputes. The more you know about how appraisals work, the better equipped you’ll be to protect your most prized investment.
Key Points You Should Know
- A home appraisal determines the current and unbiased market value of your property by an expert.
- Appraisals are often required by mortgage providers before approving a loan and can also be helpful for buyers to ensure they are paying a fair market rate.
- When evaluating a home’s value, an appraiser will consider things like a home’s age, size, overall condition, location, market trends and comparable home sales.
What Is A Home Appraisal?
A home appraisal is an objective determination of the current market value of your house performed by an (often licensed) expert. Appraisers examine key features of your property, such as the size, age, and condition, to determine a value. Home appraisals are essential for those looking to secure a mortgage (a lender wants to know the impartial value of your home before approving a loan) or for buyers and sellers who want to ensure they are receiving/paying a fair price for a property.
Some Considerations:
| How much does it cost? | The typical cost for a residential home appraisal in Canada ranges from $300 to $600, though they may go for as high as $1,000 for large, more complex properties. |
| How long does it take? | They can take as little as 30 minutes or as long as several hours. A homeowner or lender will usually receive a report within a few days. |
| Who pays? | In the case of securing a mortgage, the borrower will typically pay. In some scenarios, such as a divorce, the requesting party would pay or the cost would be divided. |
How Do Home Appraisals Work In Canada?
An appraiser will visit your home and carry out an extensive examination. They will consider things such as your:
- Home’s amenities (number of bedrooms, bathrooms, any outbuildings, the quality of interior and exterior finishes, whether the electrical and plumbing is updated),
- Property’s square footage, age, basement suites, neighbourhood location and overall condition.
- Home’s value compared to similar houses sold in the neighbourhood, and look at real estate trends in the region to come to a valuation.
You or your lender will then be given an official appraisal report within a few days.
| Are Home Appraisers Licensed? In Canada, only Nova Scotia and New Brunswick require real estate appraisers to be licensed. However, many mortgage lenders insist that their potential borrowers use an approved, licensed appraiser because they want to ensure they get an accurate assessment of a home’s value. In Canada, the Appraisal Institute of Canada (AIC) and the Canadian National Association of Real Estate Appraisers (CNAREA) are official licensing bodies. The AIC offers the Accredited Appraiser Canadian Institute (AACI) and Canadian Residential Appraiser (CRA) designations. The CNAREA oversees the Designated Appraiser Residential (DAR) and Designated Appraiser Commercial (DAC) certifications. Using an appraiser with AIC designations like CRA or AACI shows a lot of credibility and is generally preferred by lenders. |
Home Appraisal Process In Canada
Here is a step-by-step process to get a home appraisal.
Step 1. Hiring An Appraiser
Your mortgage provider will often provide a list of approved, officially certified appraisers that you can use, or, if the appraisal is for reasons other than securing a mortgage, you can hire one yourself. A good way to find an appraiser is via the AIC or CNAREA website.
Step 2. Property Inspection And Research
The appraiser will then inspect the home’s interior and exterior, making note of any key features, age, size, neighbourhood and potential issues.
Step 3. Report Generation And Value Estimation
They will then compare your home to other comparable properties in the area to help determine a value. The report is sent to the lender and/or the homeowner.
| Documents To Have On Hand As A Seller To make the process of getting an appraisal as smooth as possible, it’s wise to have the following information at hand: – List of recent upgrades and renovations (and receipts if possible, to show how much the upgrades cost) – Property tax statements – Floor plans or permits for additions – Mention any attractive features of the neighbourhood, such as noting if it is close to schools or parks |
What Can Affect A Home Value?
There are numerous factors that an appraiser will consider when determining a property’s value, including:
- Property size, layout, age and condition
- Location and the values of comparable homes that sold in the same neighbourhood
- Recent renovations or upgrades (especially for kitchens and bathrooms)
- Outbuildings like garages or other features like pools or hot tubs
- Market trends in the local region
When Are Home Appraisals Typically Required?
Here’s a look at some of the most common reasons to get a home appraisal:
- Buying a Home: Most Canadian mortgage lenders require that potential borrowers get a home appraisal from an approved expert after their offer on a home has been accepted, but before the mortgage is approved. This is to ensure the property’s value corresponds to the value of the loan; the lender wants to be certain they are not loaning more than a home is objectively worth.
- Selling a Home: Sellers may opt to get an unbiased appraisal of their home to help set a realistic price.
- Refinancing a Mortgage or Applying for a HELOC: Lenders will need to have an accurate, current valuation of your property to calculate its available equity and determine appropriate loan amounts.
- Property Tax Assessment Disputes: Homeowners can use an appraisal to challenge a problematic municipal property tax assessment.
- Estate Planning, Divorce, or Insurance: An appraisal may be needed in legal or financial situations requiring asset valuation to ensure communal assets are divided fairly.
What Happens If You Don’t Agree With The Home Appraisal?
On occasion, a homeowner may get an appraisal that is lower than expected, such as:
- During A Purchase: If the mortgage lender gets an appraisal for less than the value of the house the buyer was prepared to pay, the buyer may need to renegotiate the price with the seller or provide a larger down payment. This is because the lender will only finance the objectively appraised value of a property and may reduce the mortgage amount based on the value assessment.
- During A Refinance: A lower appraisal than expected may reduce the available equity, which can mean less borrowing power or the need to restart the process with a new lender.
Options for Disputing or Re-Appraising
If you’re not happy with the appraisal you received, you may have some options:
- You can try to request a second opinion from a new appraiser.
- Do some research on your own and provide additional comparables of homes in the area that would justify a higher value.
- If your lender has a dispute process you can try to appeal through your mortgage provider. Or you may want to try to go with a new lender.
What Can You Do To Get A High Home Appraisal?
During a home appraisal there are things you can do to highlight your home’s assets and thereby hopefully increase its value.
- Do a deep clean and declutter: This is your home’s moment to shine. While an appraiser isn’t there to judge your property’s cleanliness, a good cleaning creates a more attractive ambiance and encourages the impression that you keep your home in good condition, which may then be reflected in a higher valuation.
- Increase your curb appeal: It’s not just the inside that matters; an appraiser also looks at your home’s exterior and lot features. A bit of minor landscaping and a nicely mowed lawn can make a big difference.
- Little fixes: Do some minor repairs like paint touch-ups, cover-up small nicks in drywall, fix leaky faucets and update old wallpaper (you want to give the impression you stay on top of home maintenance and take pride in your property’s appearance). Have documents for any recent renovations, upgrades and have receipts at the ready.
- Comparables: If you can find comparables in your area, provide these to your appraiser (though they will also do their own research).
| Note: Write out a list of some of the top standout features in your neighbourhood that might not be readily evident, such as if you live on a cul-de-sac, have easy access to trails, a highly rated school system or planned community upgrades that were recently approved by council (like a new neighbourhood rec center) for example. Also, try to be home during the appraisal so you can answer any questions and respond immediately to potential concerns. |
What’s The Difference Between A Home Appraisal vs. Home Inspection?
A home appraisal is only focused on calculating the overall value of a home in the current real estate market. A home inspection, however, is about determining the physical condition and safety of a home, with the goal being to point out any major, potentially costly, issues. Buyers will often rely on an inspection to determine if a possible purchase needs major repairs or has any structural problems, such as old wiring, antiquated plumbing or other issues that wouldn’t necessarily be visible to the naked eye but could seriously undermine the condition of a home and lead to expensive repairs.
Another way to think of the difference between an inspection and an appraisal is that an appraisal protects the lender and ensures a loan matches a property’s value, whereas an inspection generally protects the buyer’s interests by revealing potential property issues.
Are There Alternative Ways To Assess My Home Value?
Realtor’s Comparative Market Analysis (CMA)
A local real estate professional can provide an informal but useful analysis of your home’s value based on what other similar homes in your neighbourhood sold for. While helpful, most lenders require an official appraisal by an approved expert.
Online Estimation Tools
There’s a range of home value estimation tools offered online by banks and real estate sites like Zoocasa and Zolo. Though these tools are easy to use and provide some insight, their accuracy varies and may not reflect your home’s most recent upgrades and the most up-to-date market trends in your area.
Bottom Line
A home appraisal by a qualified professional is a crucial part of most real estate transactions in Canada. Widely required by mortgage providers, they can also be useful for home buyers who want to ensure they are paying a fair price for a property, as well as for legal matters like property tax disputes and asset division during a divorce. By understanding the appraisal process, you’ll have a better idea of what to expect, how to prepare and how to protect your interests during a real estate transaction.
