Frequently Asked Questions
Whenever a decision is made regarding real estate asset often an exact value is required to ensure fairness and equity is achieved among all related parties. Here are a few typical situations: to determine a loan amount in a mortgage, to determine a buy out amount in a separation or to determine taxes owed from the sale of an investment property
An appraisal is considered much more accurate than an assessment. An appraisal is based on a full exterior and interior inspection of the property and requires an appraiser to carefully research comparables sales and listings found in the neighborhood. BC Assessment values are based on a July 1st valuation date and is based on mass appraisal techniques which cannot take into consideration the unique individual characteristics of the property.
In a residential context, the most appropriate approach to value is the direct comparison approach to value. In this approach, a value is determined by analyzing comparable properties that have sold within a given time frame and adjustments are made for any differences. The appraiser then reconciles the adjusted values and applies judgement to determine the final estimate of value.
There are many features that impact the value of a property. Some of the most important ones include: the location, size and utility of the site, the age and quality of the improvements, maintenance and upkeep of the home, as well as any positive or negative site influences, such as 180 degree ocean views or heavy traffic noise.
The report belongs to the person or party who initiated the appraisal request, otherwise known as the “client”. It is the client who receives a copy of the appraisal report and nobody else. It does not matter who pays for the appraisal. In a mortgage financing context, it is the broker or lender who made the original request who receives a copy of the appraisal.
An appraiser is the only designated profession that provides an unbiased estimate of value, given a certain marketing time and is the only profession relied upon by lenders, lawyers and government agencies for fair and unbiased market valuations
A realtor is experienced in providing a reasonable list price for a client’s home, known as a Comparative Market Analysis, and is simple 1 page document outlining sales and listings in the area. A realtor is knowledgeable about the buying and selling process and can advise their client’s accordingly. Realtors are not relied upon by any agency to provide opinions on market values.
A home inspector looks at the condition of the home and ensures all the components are working appropriately. They do not provide market values.
Market value is the most probable selling price, as of a specific date, given reasonable market exposure
Remaining economic life (REL) is the estimated time period for which the improvements (the house/building) continue to contribute to the value of the property. It describes the amount of time a home will remain on a site, until it is to be demolished for redevelopment. Things that affect REL are: the age and condition of the home, demand for building lots, and the zoning and future zoning plans for the area. “Does this house provide substantial economic benefit to the property as a whole?” If the answer is NO, it is highly probable the home would soon be demolished for future development and the REL would be closer to 0-5 years.
An appraiser will complete a full exterior and interior inspection of the property. This involves taking measurements, photos of each room and may take 20-40 minutes to complete. An appraiser may request the following information: lease or rental information, a list of recent updates or renovations, strata fees, etc. The property does not need to be professionally cleaned but it is important for the appraiser to move easily throughout the home and take photos that accurately depict the quality and condition of the property. To ensure a quick and seamless inspection please: have all rooms, suites and outbuildings accessible, open blinds and turn on all the lights, have the electrical panel and heating system accessible, and have any aggressive pets put aside for the duration of the site visit.
What is the difference between a residential appraisal and commercial appraisal when it comes to valuing a property with development potential?
A residential appraisal relies mainly on a direct comparison approach and will provide a value based on the current use of the property. This may result if an appraised value less than the actual market value. Costs average $300 – $500 + GST and a turnaround time of 2-3 days.
A commercial appraisal is much more detailed and will consider the future development potential of the property. Costs average $1,500 to $4,000 + GST and a turnaround time of 2-3 weeks. A commercial appraisal will consider the highest and best use of the property, ensuring a more realistic appraised value is determined.