Benefits of an appraisal

Brandon Scott is a Sherwood Park & Edmonton based mortgage consultant and the author of a weekly column entitled Real Estate Solutions in the Sherwood Park News. This article was originally published on April 12, 2013

An appraisal can play an important role in your real estate financing. Most commonly requested by a bank or lenders request to mitigate risk and provide an objective opinion on the value of the property being financed. The reports contain basic data about a home’s design, construction, and exterior finish. An appraisal also contains details about the property’s neighborhood and any adverse influences in the area that could impact the home’s value such as railroad tracks, or major traffic arteries. The appraisal will also list other properties in the same area that have sold, known as a comparable, to arrive at a market value price. Banks and lenders rely upon these reports before completing their approval. In some cases the appraisal may indicate a value for the home that is less than what the purchaser agreed to buy the property for. In this scenario the buyer would have to come-up with the difference of funds to proceed with their purchase or have a second appraisal completed that meets the lenders requirements. An appraisers report must be defendable in court, if necessary and is not the same as a real estate agents comparative market analysis (CMA). While a CMA can be helpful when a seller is attempting to determine what price to list their home for sale and often can be close to the same value of an appraisal, a lender will only consider the appraisal report when deciding whether or not to approve the property and the mortgage. There are others reasons too why hiring an appraiser may be needed such as property tax appeals, replacement cost new for home insurance, economic rent report for an investment property, estate planning, construction draws, and income tax purposes. Be sure to make sure your appraiser has their AIC (Appraisal Institute of Canada) or CNAREA (Canadian National Association of Real Estate Appraisers) designation. Download the current e-edition of the Sherwood Park News