Home Appraisers

I’m sure you will have come across home appraisers and the important service they provide if you've bought or sold property before. These are the people who ultimately decide how much our homes are worth and they have a huge influence on whether or not mortgage lenders will provide financing to buyers. If you’re in the process of buying or selling your first home, or even if you've bought and sold property before, it’s important to understand exactly what an appraiser does and how they can sway a buyer’s decision to go ahead and buy a home.

The Home Buying Process and Where Appraisals Fit In

So you've found your dream home, made an offer, and it’s been accepted. You’re now under contract to buy that home on the condition that you can get financing for it. You should already have gone through the pre-approval process for a mortgage, so you know the maximum purchase price you can afford for a home. However, this does not guarantee that you’ll actually be offered that mortgage when it comes down to it.

You see, lenders need to be sure that the price you are paying for a home is realistic. This is because, should you default on your mortgage payments and they have to take back the home, they need to know that they will get all their money back when it’s sold. For this reason, all mortgage lenders will order an appraisal from a home appraiser before giving final approval for the financing.

What is a Home Appraisal?

Basically speaking, an appraisal is a valuation of property. A home appraiser will be asked, usually by the mortgage lender, to visit the property, perform a general inspection of its condition, then analyse the real estate market, as it stands, in order to calculate a fair market value.

An appraisal is very different to a home inspection because a home appraiser is not there to give a detailed report on the condition of the home, just an overview, much like you might assess a car by saying it’s in very good, good, average, or below average condition for its age.

The condition is just one aspect. An appraiser will also consider the square footage of the home and the size of the lot, and whether there are any additional buildings such as a garage. Most of the remainder of a home appraisal report will be taken up with market comparisons. He or she will look at recent comparable sales in your neighbourhood i.e. homes of a similar size and condition to yours, and see what they sold for. The appraiser can then use that as a base and add on or deduct value for positive or negative aspects of the home you’re buying.

What Happens After?

Usually it’s the mortgage lender who orders a home appraisal though it’s you, the buyer, who has to actually pay for it – whether or not you get the mortgage. The appraisal report is sent to the lender and if the value of the home is the same or more than your offer they should be happy to proceed. But, if the report comes back with a lower valuation it’s unlikely the lender will agree to give you the mortgage. In this situation, if you really want the house, you may want to go back to the seller with a revised offer, or you could choose to walk away and find another home.

Of course, if you’re in the enviable position not to need a mortgage, or you’re financing just a very small amount to buy a home, then it’s unlikely the lender will require an appraisal. In this situation it’s easy to forget about this important aspect of the home buying process, but please don’t – hire a home appraiser yourself so you can check that you’re paying what the home is worth.

For more home services, check out the Canadian Mortgage Calculator and Home Mortgage Calculator pages.

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