Tag Archives: Nanaimo Real Estate Market

Is it a Cost or an Investment to have an Appraisal done on your home?

 A Professional Appraisal: Cost Vs Investment:

The cost of a typical professional residential real estate appraisal varies from area to area. Currently, the range is $300 to $650 for a full market value appraisal. A full market value appraisal with pre-market suggested listing price range could be an additional $50 to $100, depending again on the area that the subject property is located in.

The cost of an appraisal may be an expense and may be deductible from the proceeds in some tax areas and for some properties, and this will reduce the net cost of the appraisal. This is an area which each individual will need to consult their respective tax adviser on.

For instances where a property may have been under-priced or over-priced and the net selling price is higher than the net cost of the appraisal, one might say that an appraisal is a good investment. Where market forces or a person’s particular circumstances govern a lower price than fair market value, an appraisal may be a poor investment. Generally though, a professional opinion of value will be more beneficial to a property owner than an individual’s own limited experience can offer.

Using a Home Appraisal as a Selling & Marketing Aid

A Home Appraisal as a Selling & Marketing Aid

A full real estate appraisal done by a professional may be an essential aid in marketing a property. Before a property is listed, whether For-Sale-By-Owner or through a Realtor, is the best time to get a Market Value appraisal with a listing price analysis. A pre-marketing appraisal can assist in preventing over-pricing or under-pricing a property, thus enabling an owner to obtain their best price.

Once the subject property has been listed, the pre-marketing appraisal may be used to inform prospective purchasers and/or Realtors what the current market value of the subject property is, thus possibly reducing the potential for large scale negotiating. In other words, if an appraisal is made available to prospective purchasers and/or Realtors, the likelihood of receiving a sale at or near the list price is greatly enhanced. Prospective purchasers and/or Realtors will have more confidence in the value of the subject property.

Once a purchase contract has been agreed to, it may be possible to have the appraiser provide a letter of transmittal to the purchaser’s lender so that the purchaser may use the appraisal, thus saving the purchaser time and money in getting his/her mortgage approved.

You Need an Independent & Objective Home Appraisal

A Professional Appraisal: Your Independent & Objective Opinion

Clients hire professional appraisers for their independent & objective opinions, not to rubber-stamp predetermined sales prices, lending values, assessment values, cost estimates by builders, reconstruction cost for damaged properties, or market values for third party uses such as the income tax department or financial projections. As mentioned in the previous section, a professional appraiser treasures his/her credibility and likewise his/her right to have an independent and objective opinion regarding the value of the particular property that he/she is appraising. This opinion may or may not confirm another party’s estimate of value, such as: a sales price, a lender’s indicated loan value, an assessment value, a cost estimate by a builder, or a price on a private or MLS listing. Where another person’s estimate of value accurately reflects current market value, the two should be in alignment.

Value Credibility

 A Professional Appraisal: The Credibility You Need To Value Your Property

Fee appraisers operate within a well-defined system that has been in place for generations. There are many checks and balances built into the system and an appraiser faces severe repercussions for any serious deviation from the accepted standards of practice. First of all there is the appraisal organization that the appraiser belongs to. Many, if not most, appraisal organizations, associations, institutes and governing bodies are self-regulating and carefully guard their reputation, thus each and every appraiser adheres to their regulations in order to maintain their accreditation, designation, licensing, and/or authority to represent their particular affiliation. The second level of checks and balances is the network of prime lenders who utilize residential real estate appraisals to confirm the lending values of the properties they are mortgaging or lending on. Often major lenders have an approval system that the individual appraiser or appraisal company must satisfy in order to be on the lender’s approved appraiser list. The third level of checks and balances is the appraiser himself/herself. The fee from doing one compromised appraisal hardly justifies damaging one’s career, reputation, lifetime of diligent work ethic, and/or financial security. In summary, the professional appraiser has nothing to gain by not being as credible as is humanly possible.

A Home Appraisal Gives You Reliability & Verifiability on Value

A Professional Appraisal: Your Assurance of Reliability & Verifiability on Value of Your Property

Professional real estate fee appraisers are educated in many aspects of property valuation and real estate markets and one of the main focuses of the appraisal profession is reliability and verifiability. Essentially the data and information which an appraiser uses must be reliable and verifiable. The most common source of data and information which residential real estate appraisers use is the Multiple Listing Service (MLS). The MLS is used because the data and information is on an open market system, open for all interested parties to see and use. The Realtors who provide the MLS data and information are legally responsible to the users of that data and information, and are expected to originate or confirm the data and information to the best of their professional abilities. Some data and information is a matter of opinion and may be open to interpretation, however, for the most part MLS data and information may be relied upon faithfully by an appraiser. Another source of data and information is the own appraiser’s files on comparable properties. This data and information is prized by the appraiser, for he/she has personally verified the details at some past point in time. There is the possibility that a comparable property on file may have had renovations, upgrading, or may have even suffered damage from fire or flood, hence there is the possibility that the details may not be totally reliable.

Assessment records, Land Titles Office records, For-Sale-By-Owners, project developers, house builders, and exclusive listings are some other sources of data and information that can be utilized for comparable sales, however the details on these types of sales are often not complete and may require further verification by the appraiser when utilizing them in an appraisal report. Instances where the subject property has unique features, an isolated location, and/or where there are a limited number of MLS sales, these sources are often very helpful. The professional appraiser makes note of these situations in his/her appraisal report so that the appraisal report reader is fully informed and can adjust his/her expectations of the report.

 

Do Home Appraisals Give Historic Present or Future Values?

A Professional Appraisal: Do You Need an Historic, Present, or Future Value?

Real estate fee appraisers rely on historic costs, historic comparable sales, and historic or present income to base their estimated values for residential properties. Other types of appraisals (i.e. for commercial, industrial, multi-family residential properties) may include future values, which are generally based on some method of expanding a projected future income stream from the subject property to arrive at a Future Value as of a certain date in time. A projected future income stream from a property may also be discounted using various formulas to arrive a Present Value of the income stream, which would be reconciled with other approaches to value to arrive at an Estimated Value for an income producing property.

The type of future value that many people think of is the value that their property will be worth in the future, i.e. 6 months, 2 years, 10 years. This is generally a projection of a short-range trend line; showing graphs of historic Multiple Listing Services (MLS) average sales prices that are popularized in the media. If one looks at the long-range trend line picture, one will see a number of corrections in which prices fall for periods of time. If one smooths out the overall long-range trend line it will be seen as rising over the past century, hence one can conclude that residential real estate appears to be a good investment. The only caveat is that one never quite knows when a correction in the real estate market will happen, so that accurately projecting a future value of an individual residence becomes a guessing game at best. In addition to never really knowing when a correction will happen, the depth of the correction (i.e. the percentage drop in market values) or how long it will be before the market recovers to previous levels (i.e. 6 months or 6 years) are also unknown factors.

When pricing a house for sale, owners often include a certain amount of negotiating room in the asking price, thus making the asking price somewhat higher than current market values. As a particular real estate sector becomes more in demand, prices rise because owners receive offers that are closer to their asking prices. As time goes on, these small increases amount to moving the real estate market higher and higher. This is also, in effect, the projection of future values. This analysis can also be done by an appraiser for an individual residential property by including an addendum section in an appraisal, which adjusts competing current listing prices to reflect a listing price for the subject property. This can give an indicated estimated listing price for a particular property, however this is not an appraised value as such, but an educated projection of what is reasonable to list a property for in order to obtain the current market value based on the standard appraisal practices according to USPAP (Uniform Standards of Professional Appraisal Practice) or CUSPAP (Canadian Uniform Standards of Professional Appraisal Practice) standards.

A Professional Appraisal – What is it?

 A Professional Appraisal Defined

The type of appraisal we are talking about here is the one which is completed by a certified, designated, and/or licensed real estate fee appraiser. There are three Approaches to Value available to the appraiser. The Market Approach to Value considers recent comparable sales in the subject area. The appraiser utilizes dollar or percentage adjustments to the selling prices of these comparable sales to reflect the differences between the comparables and the subject property and arrives at an Indicated Market Value of the subject property. The appraiser may also include the Cost Approach to Value where appropriate, incorporating current building costs and depreciation for age, condition, location, deferred maintenance, and obsolescence, etc. to arrive at an Indicated Cost Value. The Cost Approach is not typically used by purchasers or sellers in the market place. Further, there is little or no evidence to support the rates of depreciation used in this approach. If the subject property is rented, the third approach, called the Income Approach to Value, may be included. The Income Approach basically takes the net income of the subject property and capitalizes that income using various methods to arrive at an Indicated Income Value of the subject property. The appropriate Approaches of Value are considered and reconciled within the residential appraisal report to arrive at a final Estimate of Value. It should be noted that the Market Approach to Value is generally the most prevalent indicator of value for most owner-occupied single family residences, since this is most reflective of the process most purchasers go through in their quest for a new home.

An Introduction to Residential Appraisals

 

The Professional Appraisal

The intent of the following articles is to focus on the mechanics of establishing an accurate value and price on an individual residential property. We will look at the roles that a professional appraisal, a free market evaluation from a Realtor, and our own observations play in the process of getting the best price for the individual residential property. Briefly we will look at the following topics:

Historic Vs Future Value:
Reliability & Verifability:
Credibility:
Independent & Objective Opinion:
Expertise in Researching Market
Selling & Marketing Aid
Cost Vs Investment
 

Selling Tips To Increase Value of Your Property

Selling Tips for Selling Your Home

These are tips that won’t cost a lot but, can make a big difference on the appearance of your home. It is amazing how just a little attention to the details will add that special appeal that the buyer is looking for!
When selling your home, one thing you can do is to have your home inspected by a professional home inspector.
This way it allows you to see your home through the eyes of a critical third party. It permits you to make repairs ahead of time so those defects won’t become negotiating stumbling blocks later.
You have the time to get reasonably priced contractors or make the repairs yourself, if you are qualified. It may alert you of items of immediate personal concern, such as carpenter ants or active termite infestation.

Always make sure that when you are selling your house is make cleaning up the outside a priority.

Curb appeal is the first impression of your house. Keeping the grass cut and the area tidy will help make a great first impression. Paint or wash the exterior of the house including window casings, shutters, and doors. Wash the windows inside and out. Check the gutters and chimney.

Also make sure to touch up the interior of your house before selling, Put a fresh coat of paint in the most used areas of the home. This will clean as well as brighten up the rooms. Wash all floors and bathroom tiles.

Get rid of clutter. Clean out your closets, garage, basement, and attic. Use self-storage if necessary. Replacing air filters will help keep the dust down.

Remember that you do not need to spend money to improve to sell unless the house is in such poor condition that it cannot be sold without improvements. Your investment in extra improvements or upgrading to the property should add to the final selling price and/or make it sell quicker than if it did not have these extra improvements or upgrades.

For example: the house needs a new roof to keep out the rain, or a modern bath with a shower. It is usually a waste of money to install a new roof if the existing roof has more than 50% of its useful life remaining. The exception is if the style of the roof covering does not suit the style of the house, such as having an existing red inter-locking asphalt shingle roof in an area where all the roofs have been upgraded to modern hi-profile fiberglass shingle roofs.

Improvements might make sense if you can do the work yourself. If you can add or upgrade kitchen cabinets for $500 rather than $1,000, you can still expect the $990 increase in the value of the home.

On the other hand, shoddy work on those kitchen cabinets can reduce the value of your home.

Many home owners have the same question regarding selling their home –  How do I prepare my house to sell?

First and foremost, put it in the best condition possible, especially if you are in a market with few buyers and lots of homes for sale.

That means taking care of any major repairs that could deter a buyer, such as replacing any broken windows or replacing a leaky roof.

Next, work on your home’s curb appeal. Make sure your landscape is pristine. Mow the grass, clean up any debris and weed the garden beds. Plant a few annual flowers near the entrance or in pots to be placed by the door.

Eliminate the source of any bad smells, such as the kitty litter box. Use air freshener or bake a batch of cookies before your open house to ensure that the house smells inviting.

Invest in a couple of vases of fresh flowers to place around the house and next to any information about the house you have prepared for buyers.

Also make sure that when you are selling you home that you offer an adjustable sales plan. Come up with a sales strategy but make sure that it is flexible and can come into terms with almost all kinds of buyers.

Try to determine what will your initial asking price will be and how long will you be insisting on it before making an adjustment.

If you are unsure of what the real estate market is for your house, it might be a wise investment to have a professional appraisal done. It could prevent you from over-pricing or under-pricing your home in today’s market. A well-priced house sells quicker and for more money than an over-priced house. An under-priced house means that you might be losing $10,000’s of dollars that could have been yours, had you priced your house correctly.

You should also plan, before selling your home, what is the lowest price you are able to accept.

Just follow these rules and surely you will be able to succeed in selling your house.