Do You Need a Real Estate Appraisal in Toronto?
Real estate appraisals can take varying forms. An appraisal is an inspection that provides an estimate for the value of a property. A mortgage lender requires an appraisal so that he or she can confirm the value of the collateral for financing.
Why Property Owners Ask for Appraisals
For the purposes of lending, an appraisal is normally performed as a verification of a property’s value, which is part of a lender’s assessment of risk. In some instances, however, homeowners today are requesting the service themselves. They are asking that real estate appraisers in Toronto perform appraisals for reasons outside of lending.
These reasons may include the following:
- Financial asset planning
- A private home sale
- Retirement planning
- Divorce settlement
Answering Key Questions
In many instances, a real estate appraisal in Toronto can assist a property owner, when he or she is the client, to establish a reasonable price for the sale of his or her real estate. Having an appraisal ordered can also help owners of properties answer the following questions:
- Are the property taxes for the real estate too high?
- What upgrades may add more value to the property?
- Should the property be rented rather than sold?
When it is performed for a home, a detailed appraisal provides the following information:
- The economic life of the property
- The property’s condition
- Further suggested inspections, such as an engineer’s report
- Additional detail on a property’s utility
If you live in a location where comparable data cannot be accessed easily, the cost of the appraisal is higher. Usually, lenders that order an appraisal for financing a home do not share the information with their clients.
Therefore, if you are a real estate purchaser who wishes to have your own appraisal done to confirm a home’s value, the information can serve you well if you wish to negotiate. For instance, if a home’s price is higher than the appraised value, it provides a real estate purchaser with bargaining power.
It also helps to have an appraisal performed on a house that you have under construction or you are buying for the first time. Doing so prevents a first-timer from overpaying.
Recognised Appraisal Methods
Three recognised appraisal methods are used in Canada. The direct comparison method compares the subject property with similar real estate property that is for sale or has been sold based on area comparables.
The cost approach of appraisal projects the replacement cost of a property before applying depreciation to certain elements such as the physical condition, function, and external obsolescence of a structure.
An income approach is used for commercial valuations. It estimates the potential income of a property and applies the proper mathematical equation.