In the transaction of real estate properties, both the lenders and buyers need to have proper documents and various reports to ensure no fraudulence occurs. An appraisal report is one of the significant reports required in the transaction of real estate properties such as homes, buildings, etc.
Various third-party companies provide online and offline appraisals to facilitate proper transactions in buying, selling, and refinancing houses. Metrowide Appraisal is one such company dedicated to delivering high-class, quality appraisals for homes and other real estate properties.
What is an appraisal, and why is it necessary?
Appraisal refers to an impartial report prepared by certified and professional appraisers. For example, a real estate appraisal report states the fair market value of a house or commercial property.
There are several situations in which appraisal is necessary. For instance, homeowners can request an appraisal to verify the property’s value, check on tax assessments, etc.
Additionally, homeowners need appraisal reports to plan financially and verify whether to sell the property or rent it. On the other hand, buyers and lenders such as banks need to ensure that they aren’t paying more than the property’s actual worth.
So, the overall point of using appraisals is to ensure that you can get fair valued houses that can be used as collateral in the prospective future.
Factors influencing a real estate appraisal
An appraisal report produced by reputable advisers can be based on various factors. Some of these factors are listed below.
Age refers to the lifespan of real estate property. Old homes maintained properly are more likely to increase the value than new and fresh houses with poor maintenance.
Size and location
The area where the property is situated plays a vital part in estimating its valuation. For example, the location of nearby malls, schools, fire, gas and police stations, etc., can affect the appraisal.
Structure and design
Modern-built home designs are likely to be evaluated for a higher value than old designs. However, unless the structures are remarkable and historical, they do not increase the value of a property.
Updates and repairs
Houses or properties with recent updates and renovations are likely to be priced higher than those with no upgrades and repairs. Moreover, modern installation, painting, furnishings, etc., increase the value.
The primary base of property valuation depends upon the actual market values in local and national markets. Moreover, the demand vs. supply gaps also plays a massive role in estimating the property’s actual value.
Methods involved in appraisal preparation
A skilled appraiser opts for an unbiased direction when evaluating the fair price. The appraiser uses methods or techniques to quote the correct price of the property.
As mentioned below, there are three approaches or methods involved in preparing appraisal reports.
1. Cost approach
In this method, the appraiser estimates the property valuation by determining the total construction cost. It means the appraiser calculates how much it would cost to build an equivalent property if the current one is destroyed. Out of the three estimation methods, this method is less reliable and usually works best for new properties.
2. Income approach
This approach is considered the most complex and difficult of the three methods. In this approach, the appraiser determines the market value of a property by calculating Net Operating Income (NOI) and dividing it by the capitalization rate. In this method, the property’s condition and other factors are also considered for the valuation of income-generating properties.
3. Comparison approach
In this method, the appraiser compares the current property with recently sold properties. A minimum of three such comparisons are necessary to evaluate the price and value of a property. Typically, the comparisons are made with recently sold properties in nearby neighborhoods with similar attributes such as square footage, distribution of space, number of bedrooms and bathrooms, etc.
How to get a real estate appraisal?
If you are a lender or house owner looking forward to getting a property appraisal in Toronto, check out below mentioned steps for the process.
Research online for value estimation services
Before employing appraisers, it is essential to know the brief valuation of your property using online software and technologies. So, research online about the credible and accurate websites that offer a free estimation of property values.
These platforms usually have a home value estimation tool that checks for street addresses and house numbers to approximately estimate the value of houses. Although the remote appraisals of this sort are not entirely accurate, they will help you understand the terms and processes better for the onsite appraisal process.
Look for reliable appraisers
Once you have briefly checked the valuation using online tools, it is time to check out the reputed appraisers in your local area. The most reliable appraisers have appraiser licenses and certificates to vouch for their expertise in Toronto.
Check out nearby experts, get referrals from friends and relatives, or look for Appraisal Management Companies (AMC) before settling for an appraiser. Ensure that you ask for credentials, client referrals, accuracy standards, etc., from the selected professionals before finalizing.
Prepare for an onsite examination
Once you’ve settled for a particular appraiser, it is time to prepare your real estate property for onsite inspection. Ensure to clean the place thoroughly and fix the leaking taps, cracked floors, broken window sills, chipped paint, dangling door handles, loose railings, etc., to avoid lowering the valuation of the property.
Ensure to clean the walkway, backyard, etc., and gather all the documents that signify any update, renovation, or replacement performed on the property in the last 10-15 years.
Pay the fee and review the report
Post the inspection; the appraiser generally takes up to one week to accurately estimate your property valuation. Once the appraisal report is received, you can pay the fees as per the contract agreement. The appraisal fee comprises costs for onsite inspection, appraisal report, appraisers’ expertise, comparable sales analysis, and other management fees.
Typically, the appraisal fee ranges from $350 to $700, depending on the region and appraiser. Once you have paid the amount, check whether the outcome is as per your expectations. In case of unsatisfactory results, you can apply for reconsideration of valuation.
It is crucial to refer to reliable sources while getting the appraisals. For instance, various companies or individual appraisers offer comprehensive appraisal services in Toronto. Ensure to appoint credible professionals for appraisals if you are a homeowner looking to sell your property at a reasonably profitable price.
On the other hand, if you are a buyer, ask for appraisal reports to know the property’s fair market value to avoid overpaying.