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Home Appraisals and How to Get the Best Value from Yours - Buyers and Sellers
First, let's cover what an appraisal is not. A bank ordered appraisal is not a home inspection and it is not a Real Estate appraisal to determine what your asking price will be. Rather, it is an appraisal done strictly for the benefit of a potential lender to determine the base dollar value of a home.
An Appraiser builds his report from two or three different approaches. The one most lenders look at first is the "Sales Comparison Approach." This approach deals mainly with a direct comparison of similar properties nearby that have recently sold, preferably in the previous 90 days. This approach gives the lender the clearest indicator of the value of the home.
The second approach included in the appraisal is the "Cost Approach." This supplies the value or cost of each improvement in a home, so as to compare apples to apples as it were. So simply put, if your home has an upgraded kitchen but all the other comparable homes sold in your area did not, then the appropriate dollar value of that upgrade would be added to your appraisal estimate. Conversely, if all the other homes had one more bathroom than yours, then that dollar value would be subtracted from your home value.
The third approach is more for an income producing property, (i.e. property with a rental unit) and is called the "Income Approach." This would reflect the income the property produces in addition to the actual home itself.
So what can you do to get the best appraisal? Aside from making home improvements prior to the appraisal, have a list available for the appraiser when he comes, of any and all newer replacement and improvements that have been done to your home. He can't necessarily tell how old your roof or your Jacuzzi tub is, or the new updated wiring you just put in unless you tell him. Did you just have your vents cleaned or your septic tank pumped? Give him the copy of your receipt. This gives him a much more up to date idea of what condition these items are in.
If on the other hand you are a Buyer, an appraisal can be your friend. Should an appraisal of a home you have an offer on come in substantially lower than the asking price, this could be a chance to negotiate a lower selling price. Of course, much depends on the market, amount of offers currently on the property, and owners' need to sell.
Appraisals are just one of the many facets in the maze of Real Estate and Financing. Having professionals on your side will help you obtain the best results and avoid costly pitfalls, not to mention unpleasant surprises. If you would like to obtain the best mortgage service available, (covering GTA and Muskoka) feel free to call me to discuss your questions and concerns.
DARLENE HINTON - Mortgage Agent - MORTGAGE ALLIANCE - License #M10001367
Sherry Rioux is committed to making your real estate experience the best it can be. Whether you are a buyer or seller, Sherry will help make your real estate transaction as smooth as possible while maintaining the highest level of service and professionalism. Sherry provides accurate and current market information, skilled analysis, and sound, honest real estate advice. Sherry is committed to exploring new ideas and implementing the latest technology, to make the selling and buying of real estate a pleasurable experience.