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Ask the Appraiser?
Buy/Sell/Finance
1. We often hear it's best to buy the lower priced property
in a particular area for future resale. Why is this so?
Real estate value, like water, seeks its own level. For example assume the range of
value in your area is between $100,000 to $125,000,and your property has a market value
of $100,000. The overall market value in your area increases on average by 5%, your
property will out perform the average increase in the market by the greatest margin.
If the overall market dropped in value, your property will be the least negatively
affected. Therefore, everything else being equal, it is best to own the lower market
valued property in an area for maximum re-sale value.
2. We recently have been approved for financing on a home
we intend to buy. Does this mean there was an appraisal completed?
Not necessarily. The lender has to be concerned about your credit worthiness and their
exposure to loss. You were most likely required to pay for mortgage insurance to protect
the lender in case of default and in addition an application fee which may not have
included an appraisal of the property. One of the ways to protect your interest is to
insist the clause "subject to the appraised value meeting or exceeding the agreed
purchase price" be in the offer to purchase agreement and go over that appraisal
document with the appraiser, well before the commitment to go forward with the
transaction occurs. The purchase of a home is a very emotional time, therefore it is
important to obtain objective advice. Always remember, buyer beware.
3. We have often heard about the importance of pricing as a
key factor in selling real estate. Please explain?
The asking price is the key factor in obtaining the most for your property. Therefore it
is imperative you properly price your property to the market. This is simply said but what is the
right asking price? The best way to determine this is by having an objective market
analysis completed by someone who has no vested interest in the property. This opinion
of market value should identify not only the most recent relevant sales data in the
market but also current competitive listings on the market.
4. What's my property worth?
This is the most common question asked and the answer is best obtained by having an independent appraisal completed. An appraisal consists of a thorough property inspection, location analysis, an investigation of relevant market data and equating that information into an indication of market value for the property. Your property's value is often the cornerstone of your financial well-being and consideration should be given to having its value established by an independent professional.
5. We are considering the purchase of a condo. What are the most important issues?
As always location is the key to any real estate decision. Always buy with the consideration
of how long will I own the real estate and what will likely be its resale value. With
respect to condos, not only the location of the complex is important but the location of
the unit within the complex is also key. The condo should fit your life style. Does the
unit have a functional kitchen, does the bathroom(s) have sufficient space, does the unit
have adequate laundry facilities, is it sound proof, are the neighbors compatible, how many
units are owner occupied, is there adequate parking and how much natural light does it
receive? Practical areas such as: is the complex competently managed, what are the condo
fees, is it sufficient to cover common area costs, are there major concerns with capital
items such as roofing, windows, pavement and are there sufficient reserves for their
replacement should be known. Paying a fair price is the next most important issue and
probably the most complex. Determining fair price should always be based on an informed
buyer knowing the market place. It is not always clear what other purchasers have paid.
Make an informed decision and make all offers to purchase subject to an independent
appraisal whether you need financing or not. Finally if you now own a property, you
should know what you are most likely to obtain in the market place for that property.
Therefore, an independent appraisal should be obtained before you agree to offer on any condo.
David Foote of BOOM, BUST and ECHO fame has stated we are just as the beginning of the condo
living era due to the demographics of the population. If you intend to buy, make sure the
location and unit is for you, know common area issues, pay fair market value, buy with a
thought of resale and know the market value of your existing property before you do anything.
6. Do we need an appraisal, if we have had a building inspection completed?
An appraisal and a building inspection should not be confused as serving the same function.
An appraisal is an opinion of a property's market value. While the physical condition of the
property is critical, the appraiser also has to consider subjective issues such as: location,
design /function, supply and demand, which have a significant influence on marketability
and value. A building inspection is a thorough examination of the physical condition of the
structure and its components. Prudent purchasers generally make their offer to purchase
subject to both an appraisal and building inspection.
7. Is appraised value and market value the same?
Appraised value is an opinion of market value by an appraiser. Market value is that amount
a vendor agrees to accept for their property, but not all that has been agreed to as
purchase price between a buyer and seller is market value. Appraisers utilize properties
which have sold, to interpret what the property their appraising is worth. Not all appraised
values are market value, however, not all agreed purchase agreement are market value either.
The appraiser interprets what the market value is most likely to be. The more unique the
property is, the higher the margin of error. In residential appraising a typical example
is a corporate transfer where two appraisals are obtained. The employee is guaranteed a
price for the property based on the two appraisals, however, the appraisals have to be within
5% of each other. If they are more than 5% apart, a third appraisal is obtained.
8. We have been trying to sell our home for some time now and have had no serious offers. We purchased it five years ago and completed renovations to suit our needs. All we want back is our purchase price and the cost of renovating our home. Why is it not selling?
There are a number of possible reasons why you can't get back your investment. You may
have paid too much when you purchased the home five years ago. You may have bought your
house at the height of the market. You may have overspent on renovations, therefore, the
marketplace is not prepared to pay what you spent. Your renovations may have been
completed to suit your needs and may be so specialized that few potential buyers find
them appealing. Generally, the most common reason for a property not selling within a
reasonable marketing period is that the property listed for sale is in excess of its
current market value. The asking price should be marginally above market value. If the
property has been overpriced for some time you have probably missed the market and it may
be best to take it off the market and re-enter later, at an appropriate asking price. An
overpriced property often sells below market value as genuine purchasers are scared off by
the excessive price, and may be absorbed elsewhere in the market place. Establishing the
right asking price for a property is the key to obtaining maximum return, within a reasonable
marketing period. Therefore, it is imperative you price your property to the market. The
best way to determine this is by having an objective market analysis completed by someone
who has no vested interest in the property, a professional real estate appraiser. This
opinion of market value should identify not only the most recent relevant sales data in
the market, but also current competitive listings in the market area.
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