Home appraisals are key in certain real estate transactions like when buying or selling a home or during mortgage refinancing. Appraisals are used to determine whether a home’s sales price is appropriate given its features, location, and condition.
Lenders, for example, use an appraisal to ensure they aren’t handing the borrower more money than their home’s worth.
The following is everything you need to know when it comes to the home appraisal process in Regina’s housing market.
Three Property Valuation Approaches
In Saskatchewan, three property valuation approaches are used to determine the value of a home. They are the cost approach, sales comparison approach, and property income approach.
- Cost approach - This approach values a property based on its replacement cost, less depreciation, factoring land values based on recent sales. The approach is especially useful in situations such as when the comparable sales are few or when there is no information on rental income and expense.
- Property income approach - This one values a property based on the potential rental income. The appraiser will take into account both the rental expenses and the potential income to estimate the property value.
- Sales comparison approach - This approach works well in areas with active sales markets, like residential property situated in a metropolis.
“Ad Valorem” Mass Appraisal System
The appraisal system in Regina, SK is based on “ad valorem.” Ad Valorem simply means “according to value.” According to this appraisal system, the amount of tax payable by a property owner must be proportional to their property value.
The accepted standard for property assessment in North America is based on market value. Mass appraisal valuation represents the patterns in supply and demand for a group of properties in a market instead of a single property.
For maximum accuracy of the final assessed values, appraisers will also factor in other crucial data. Including, prevailing property values, rental income information, and using the valuation approach to estimate the best value for various property types.
The Appraisal Report
Once the appraisal has been done, the appraiser will write a report of their findings. The following are a couple of things the appraiser will include in their report:
- A street map showing the property that has been appraised.
- Comparable sales that they used to arrive at the property’s value.
- The sketch of the exterior building.
- Some calculations on how they calculated a home’s square value.
- Some photos of the back, front, and street scene of the home.
- Photos of comparable homes used.
- Other important information, such as public tax records, public land records, and market sales data.
Other things a home appraisal will look at include the housing market, neighbourhood, appliances, basement, and attic features, and even the home’s age. To get the highest appraisal, make sure your house is rent-ready and staged.
What a Home Buyer Should Know About Appraisals
Are you looking to buy a home in Regina? If you are, then an appraisal will be one of the initial steps in the closing process, especially if you’re buying a home under contract.
As a buyer, the appraisal process gives you an upper hand. If the appraisal value is low, it can be a negotiating tool for you to convince the seller to lower the asking price. After all, your bank won’t lend you more than what the home is worth.
That being said, a seller may feel reluctant to lower the sale price because they may feel the appraisal value was inaccurate. In such a case, it may be best for both of you to consider getting another appraisal from a different professional, as it isn’t uncommon for appraisers to make mistakes.
What a Home Seller Should Know About Appraisals
When selling your Regina home, a low appraisal can seem like a deal-breaker. After all, it may mean selling your home lower than you had anticipated.
Certain factors can be responsible for a low appraisal value. They are as follows:
Market Conditions
A home appraiser will go beyond just beyond looking at similar properties. They will also examine other things such as vacancy rates, foreclosure rates, and forecasts on demand and supply.
Renovations
Have you overly personalized your home? If you have, then that can have an impact on your home’s valuation. Your taste may not be everybody’s taste.
Home Size
Of course, how big or small your home is will have an impact on the appraisal value. Besides the square footage, the number of bathrooms and bedrooms will also impact the appraisal.
Deferred Maintenance
Deferred maintenance is arguably one of the factors that reduces a home’s appraisal value. A roof leak that may have cost you a few hundred dollars to fix a year ago can end up resulting in thousands of dollars of repair costs.
When this comes to the attention of the appraiser, the appraisal value will certainly go down. So, before having an appraiser go through your home, make sure all maintenance issues have been taken care of.
Home Location
Location is an important factor when it comes to an appraisal assessment. Of course, it wouldn’t make sense to compare a home in Rosemont with one in Germantown. Appraisers will consider things like the quality of roads, proximity to schools, neighbourhood amenities, and how near the home is to the street.
Curb Appeal
The phrase “Don’t judge a book by its cover” doesn’t apply when it comes to homes. An appraiser will judge how your Regina home looks from the street because that’s one of the factors potential buyers will consider. It’s a fact that an attractive home will attract more interest on the market.
How Long Does a Home Appraisal Take?
On average, expect a home appraisal to take anywhere between 7 to 10 days. The appraiser will visit your property and spend an hour or two inspecting its exterior and interior.
Bottom Line
Except in a case involving an all-cash buyer, a home appraisal is a must whether buying/selling a home or refinancing your existing mortgage. Having a basic understanding of how the appraisal process works can only work in your favour.
If you’re still unsure how to navigate appraisals, get in touch with me, Jennica George. I’m an experienced realtor in the Regina, Emerald Park/ White City and, Lumsden areas that can help you with any of your property brokerage needs.
