When you are purchasing a home, knowing the property's value is a very essential step in the process. A professional real estate appraisal is a report which estimates the value of a property based on current market conditions and will help you estimate the value.
The market value of a house is determined by a large number of criteria, each of which have a great influence on the overall value. These factors include items such as the square footage of the home above grade, age, condition, the size of the site the home is one, location, garage size and development, bathrooms and even the level of development in and the size of the basement. When getting an appraisal from an appraiser there are two processes, the inspection and the analysis.
Physical Inspection
Getting all the facts
The first step of a residential property appraiser is to conduct a site inspection. This inspection will include exterior and/or interior measurements of the improvements. Any additional site factors are also noted including decks, detached garages, landscaping, or even fencing. Once inside the appraiser will proceed from room to room taking notes on the house. These notes can include, but are not limited to the floor covering in the house, the room allocation, condition, upgrades, renovations, number of bathrooms, basement development.
Once the inspection is completed, the job is not over. The appraiser will then proceed to the analysis portion of the assignment. The notes taken from the physical inspection are then entered into a residential appraisal report along with determining the estimate of value.
Report Preparation
The Adjustment Process
In Canada, value can be determined by any of three approaches to value. These are: the Direct Comparison Approach, the Income Approach and the Cost Approach. Typically for single family homes, the Direct Comparison and the Cost Approaches are applied to estimate the value of your home.
The major premise of the Direct Comparison approach is that the market value of a property is directly related to the price of comparable and competitive properties. The advantage of the Direct Comparison Approach is that it reflects the actions of buyers and sellers in the marketplace. The approach is most valid when truly comparable sales or offerings from the same general area are available for comparison.
The Cost Approach entails the theory of estimating the market value of the land plus the cost of all improvements including all depreciation. There are several types of depreciation, but for this instance we will not go into that topic.
The biggest part of estimating the value of your home is the Direct Comparison Approach, comparing your home to others that are considered to similar to yours and adjusting for the differences. This is where an appraiser will adjust for all the individual criteria pertaining to your home relative to other homes that has sold. Major areas for adjustment are: age, condition, location, house size, level of development and size of the basement, garage size and finish, extra upgrades, renovations, bathrooms. Base on the comparables applied and adjusted for, a range of value is established. By employing the appraiser's skill and experience a single point of value is established within this range. This is the appraiser's estimate of value for your home.
Please note that there are of course many other factors and not all appraisals are the same. If you are interested in getting an appraisal on your home please see our order form here.