If you're in the market to buy a home, you've probably heard the term "home appraisal" thrown around. A home appraisal is an important part of the home buying process, and it can have a significant impact on your overall experience.
A home appraisal is an assessment of a property's value conducted by a licensed appraiser. And while you can sometimes get an estimate of what the home could be valued, it's important to get a proper assessment.
That's why the appraiser will visit the property and evaluate a number of factors that can impact the value of the home, both inside and out. This can include things like:
The appraiser will then provide a report that includes an estimate of the home's value, as well as an explanation of how they got to that value.
This type of appraisal is for anyone in the closing process of purchasing their home. For someone buying a home, the appraisal process takes place after an offer is made. This way, prospective buyers are able to gauge whether an offer is accurate as well as if a property is fairly and accurately priced
Appraisals are useful for sellers to help decide if their listing price is accurate based on the current market. However, it’s important to note that this process usually happens after a property is listed. This is because the cost of getting an appraisal usually falls on the buyer. So unless you’re willing to foot the bill in advance, you’re usually waiting to be at the offer stage for the buyer to pay their lender to conduct an appraisal.
It’s a requirement in Canada to conduct an appraisal during mortgage refinancing. In this situation, the appraisal helps to assure the lender that they aren’t loaning the borrower more money than the home’s worth. For example, if your home’s value has dropped over time, there may be a possibility you’re unable to refinance. And if your appraisal ends up putting your equity below 20%, this also could impact your requirement to pay mortgage insurance. It’s important to resolve any major issues in your home and get it in tip-top shape before getting an appraisal done for refinancing.
While the cost can vary by province, the going rate for a home appraisal in Canada is approximately between $300 to $500, but can be more depending on the location of your home. Choosing an appraiser is up to your mortgage lender, so as the buyer, you don’t have very much say, however you are responsible for covering the cost.
But, if you get your mortgage with Pine, we’ll reimburse you for your appraisal costs.
A home appraisal is necessary for a number of reasons. Firstly, they help determine the market value of a property, which is super important for both buyers and sellers. When someone is buying a house, they want to make sure they're paying a fair price. Similarly, when someone is selling a house, they want to make sure they're getting a fair deal. An appraisal can help ensure that everyone is on the same page and that the transaction is fair for both parties.
But it's not just about buying and selling - appraisals can also be useful in other situations. For example, if you're refinancing your home, the lender may require an appraisal to determine how much equity you have in the property. Or if you're getting a home equity loan or line of credit, an appraisal can help determine how much you can borrow.
Basically, they can have a big impact on your finances when you're buying a house. Here's the deal: if the appraisal comes back lower than the purchase price, you might need to cough up more cash for a down payment. Why? Because lenders use the appraised value of the property to calculate the loan-to-value ratio, which determines how much they're willing to lend you. So if the appraisal is lower, you might not get approved for as much money as you need. This can put a dent in your budget and might make it harder to buy other things you need, like new appliances or furniture.
From an emotional perspective, the home appraisal can impact how you feel about your potential new home. If the home appraises for less than the purchase price, you may feel like you're overpaying for the home. On the other hand, if the home appraises for more than the purchase price, you may feel like you're getting a good deal. This can impact your overall satisfaction with the home and your home buying experience.
Once the home appraisal is complete, the lender will review the report and determine whether the home is worth the amount of the loan. If the home appraises for less than the loan amount, the lender may need you to come up with additional funds or renegotiate the purchase price.
Essentially, lenders want to ensure you don’t over-borrow because the home serves as collateral for the mortgage. But if the home appraises for more than the loan amount, you may be able to use the extra equity to their advantage.
A home appraisal is a crucial way to discover the fair market value for your home and can help both buyers and sellers. By understanding the home appraisal process, you can know what to look out for when getting a property appraised and ultimately ensure that you're getting the most out of your home buying experience. If you’re looking to start the appraisal process or have questions about your mortgage options, one of Pine’s mortgage agents would be happy to speak with you to help kickstart your home ownership journey.