An appraisal is an unbiased estimate of what a buyer might expect to pay (or a seller to receive) for a parcel of real estate. Typically, appraisers are engaged to provide a professional opinion or consultative valuation service on the quality, value or utility of a specific property.
Appraisers are governed by one of the three professional associations: the Appraisal Institute of Canada (AIC); the Canadian National Association of Real Estate Appraisers (CNAREA); and Ordre des Evaluateurs Agrees du Quebec (OEAQ). Each body provides professional standards and educational requirements that appraisers must meet and maintain in order to be in good standing. Rigorous training, professional education and exams must successfully be completed in order to be designated an appraiser.
In addition, we at Centract manage and monitor the appraisers in our network to ensure that they meet our high standards of competence, customer service and professionalism - in addition to the standards of their respective governing bodies and those of our lender clients. We undertake various activities that ensure the quality and integrity of the appraisal reports, including validations that ensure that appraisers are following a lender's requirements. The benefit to you and your clients, is speedier processing and comfort that the deal will get done.
Below are the steps that an appraiser follows in appraising a property:
1. Setting the appointment: The consumer can expect a telephone call from the appraiser within 24 hours of the appraiser receiving the appraisal request from us. The appraiser will arrange, with the consumer, a mutually agreeable time for the inspection of the property.
2. Property inspection: The inspection should take approximately 20 to 30 minutes to do the property inspection, with much of the analysis and work involved is done by the appraiser once they return to their office. At the inspection, the appraiser will ask questions regarding the property such as its age, recent updates, age of roof, etc. In some instances, the appraiser will be required to take photos of the interior and exterior of your home as well as your neighbourhood.
Please note that during the inspection, the appraiser is not able to discuss the final value estimate; any questions regarding this should be directed to us.
3. Completing the report: Once the appraiser returns to his/her office, data collection regarding the subject property continues. The appraiser will perform an extensive review of Multiple Listing Service (MLS) information in an effort to find the most appropriate comparable sales to establish market value. The appraiser will also collect and review various other information sources relating the property and/or neighbourhood including but not limited to, municipal tax, government planning department, and on-line registry information as well as costing manuals, and other properties listed for sale within the neighbourhood. If the appraiser has questions regarding any of the MLS information he/she has obtained, the appraiser may also follow-up with telephone calls to the realtors involved in the individual comparable sale transactions. Once all the information regarding the subject property and the most appropriate comparable sales is obtained, the appraiser reconciles the information in his/her report to arrive at a well reasoned final value conclusion.
4. The final report: Once complete, the appraiser will upload the appraisal report to Centract. Centract conducts validations to ensure the report's completeness, integrity and quality, and upon completion, Centract will forward the final completed report to the financial institution.
If available, the consumer should please have the following on hand for the appraiser:
ü The municipal tax assessment bill;
ü A deed or title report showing the legal description;
ü A survey of your property; and
ü If renovations have been completed, the scope of work and costs to complete.
Gathering information is one of the primary roles of an appraiser. It can be classified as specific or general.
- Information specific to the property is gathered from the home itself - such as location, condition, amenities, size, etc. - and is gathered by the appraiser during the inspection of the home.
- General information is gathered from a number of sources, which includes but is not limited to:
ü The local MLS for data on current listings and recently sold homes that might be used as comparable sales and provide a sense of what the market is paying for similar homes in your neighbourhood;
ü Tax records and other public documents for verification of actual sales prices in a market; and
ü In addition and most importantly, the appraiser leverages general data from his / her past experiences in creating appraisals for other properties in the same market.
The appraisal report is owned by the financial institution, which is the institution that orders the appraisal report. While the homebuyer may pay for the report as part of the closing costs, the lender retains the right to use the appraisal report or any information contained within. Note that the appraisal report is integral part of the documentation and risk requirements needed by the lender for financings that are secured by real property.
How does an appraisal differ from a tax assessment, CMA or home inspection?
These are each done by different professionals for different purposes, and are based on different sources of underlying data (such as different timeframes) and different methodologies. The result is that these reports, and the values they provide can vary significantly. The following summarizes:
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