May 11, 2023
Surprising factors that can affect an appraisal for your house
Are you buying or refinancing a property in Ontario? You may be required to get a home appraisal.
An appraisal is a property's value assessment by a certified real estate appraiser. It can come into play when setting home insurance limits and during the claims process. Primarily; it is a valuable component of buying or selling a home. Here's what you need to know about home appraisals in Ontario.
What is a home appraisal?
A home appraisal is an unbiased estimate of the fair market value of a property conducted by a professional appraiser. The appraiser considers various factors such as the size, age, condition, and location of the house, as well as recent sales of similar properties in the area.
The appraisal report typically includes details about the features, a comparison to similar huses in the area, and an overall valuation of the property. Lenders often require appraisals when a borrower is seeking a mortgage or refinancing, as they want to ensure that the property is worth the loan amount.
However, appraisals can also be helpful for people who are considering selling their homes, as they can help them determine a fair asking price.
What hurts a home appraisal?
Various factors can hurt a home appraisal and result in a lower valuation than expected. Here are seven common factors that can have an impact :
- Poor condition : If a home is in poor condition or has significant damage, such as a leaky roof, outdated plumbing or electrical systems, or structural issues, this can decrease its value.
- Outdated features : Homes with outdated features or designs, such as an old kitchen or bathroom, may be valued lower than those with modern amenities and updates.
- Location : The location is a significant factor in its value. Homes located in less desirable neighbourhoods, near busy roads or highways, or in areas with high crime rates may be valued lower.
- Lack of curb appeal : A home's curb appeal or appearance from the street can affect its value. A poorly maintained yard, a lack of landscaping, or an unattractive exterior can all negatively impact you. When you’re tackling your spring home maintenance, consider doing some upgrades.
- Recent sales : The sale prices of comparable homes in the area can also affect the appraisal. If current sales show a decrease in values, this may result in a lower assessment.
- Illegal additions or modifications : Any illegal additions or modifications to a home, such as unpermitted additions, DIY renovations, or knob and tube wiring, can decrease its value.
- Economic conditions : Economic conditions, such as a recession or a housing market downturn, can also negatively impact appraisals.
What does a home appraiser look for?
A home appraiser looks at many different factors when determining the value of a home. Here are some of the things an appraiser typically looks for :
- Property size and features : The appraiser will measure the size of the property and note any unique features, such as a swimming pool or a garage.
- Compliance with zoning and building codes : The appraiser will check to ensure the property complies with local zoning and building codes, and note any issues that may affect the property value.
- Age and condition : The age and condition of the home are essential factors. The appraiser will look at the age of the roof, HVAC system, plumbing, and other major components, as well as any damage or wear and tear.
- Location : The neighbourhood, the proximity to schools, parks, and public transportation, and other factors that may impact the value.
- Recent sales of comparable properties : Recent sales of comparable homes in the area to determine the property's value. They will look at the size, age, and features of them to make comparisons.
- Upgrades and renos : The appraiser will note any upgrades, such as a new kitchen or bathroom, and consider their impact on the value of the property.
- Overall market conditions : The general state of the real estate market in the area, including supply and demand, economic conditions, and other factors that may impact values.
Does a home appraisal affect insurance?
No, a home appraisal typically does not directly affect home insurance. Your policy is typically based on the cost to rebuild or repair rather than it's market or appraised value.
However, an appraisal could indirectly impact the cost if it reveals that the property is in poor condition or has features that could increase the risk of damage or loss, such as an old roof, outdated electrical or plumbing systems, or a lack of safety features like smoke detectors.
In these cases, the insurance company may require repairs or upgrades before providing coverage, which could impact the insurance cost. Additionally, the appraisal reveals that the home is worth more than previously thought. In that case, the homeowner may want to increase their coverage limits to ensure they have adequate protection in case of a home insurance claim.
A home apprisal checklist
If you are preparing for a house appraisal, here are some tips that can help you get the most accurate valuation possible :
- Clean and declutter : Make sure your home is clean and free of clutter. This will help the appraiser see your home in the best possible light and may help them notice upgrades or features that could increase the value.
- Make repairs : If there are any repairs that need to be made, such as fixing leaky faucets, replacing broken windows, or repairing damaged walls, make sure to take care of them before the appraisal. A well-maintained home is more likely to be valued higher.
- Provide documentation : If you have made any recent upgrades or renovations to your home, provide the appraiser with documentation, such as receipts, to show the work that was done and how much it cost.
- Make a list of upgrades : Create a list of any upgrades or features that you believe could increase its value, such as a new roof and an updated kitchen.
- Share neighbourhood information : If any features of your neighbourhood could increase the value of your home, such as proximity to schools or parks.
- Be present for the appraisal : Be available during the assessment to answer any questions the appraiser may have and to provide any additional information that could impact the value.
By following these tips, you can help ensure that the appraiser has all the information they need to evaluate your home accurately.
How much does a home appraisal cost?
A home appraisal can cost between $350 to upwards of $700. Factors such as the company, what is included in the review, and location can contribute to the fluctuation of how much it can cost. Generally, the lender, not the buyer, pays for the appraisal.
Home appraisal FAQs
Yes, cleanliness can affect a home appraisal. A clean and well-maintained home is likely to be valued higher than a cluttered or dirty home. When an appraiser visits a home, they look at the property's overall condition, both inside and out. Additionally, a dirty or cluttered house can indicate to the appraiser that the homeowner needs to take better care of the property. This can negatively impact the appraised value, and the appraiser may assume that other maintenance issues must be addressed.
The time it takes to complete an appraisal can vary depending on a few factors, such as the size and complexity of the property, the appraiser's schedule, and how quickly the homeowner provides necessary information. However, on average, an appraisal typically takes anywhere from 30 minutes to a few hours to complete. Once the report is complete, it is typically sent to the lender or homeowner within a few days unless they need additional information or if other factors delay the process.
No, only a certified real estate appraiser can formally appraise a property in Ontario. Realtors are not certified appraisers or qualified to provide an appraisal that can be used for mortgage financing purposes.
You can contact a real estate professional to get an estimate or schedule an appraisal with a certified professional. Websites such as Zolo.ca can help give you an estimate before you book with a professional.
Understand the importance of home appraisals and insurance
An appraisal is integral to Ontario's home buying and refinancing process. It is essential to work with a certified real estate appraiser the Appraisal Institute of Canada licenses to ensure the appraisal is accurate and reliable. By understanding the appraisal process, you can be better prepared for the home buying or refinancing process and ensure your home insurance in Ontario provides enough protection.