Whether you’re buying, selling, refinancing, or simply curious about your property’s value, accurately assessing its fair market value is essential. This task requires more than just a gut feeling or quick comparisons; it demands a detailed and systematic assessment of various factors.
To guide you through this process, we've highlighted the key elements to examine when evaluating a property's value, whether you choose to do it yourself or consult a professional.
How to determine the value of your home?
Here are the key points to consider when appraising a home.
Analyze comparable properties
In real estate, analyzing comparable properties means estimating a home’s value by comparing it to similar properties that have recently been sold in the same area. To ensure an accurate and detailed comparison, gather information on:
- Year of construction
- Number of floors
- Living area
- Lot size
- Exterior quality
- Interior finishing materials
- Property features
It's recommended to choose three to ten recently sold comparable properties to establish a price range that accurately reflects the market.
Remember, for a fair evaluation, adjustments will be needed since the homes you’re comparing will not be identical. Features such as a garage, pool, finished basement, additional terrace, or patio can greatly impact the price.
Given the complexity of this task, it’s often advantageous to consult a professional with experience in making these comparisons.
Calculate the cost of renovations
If the home requires a refresh or significant renovations, it’s important to assess the general condition and identify the components needing improvement, as these will affect the property’s value.
If you own the home, consider getting a professional inspection to pinpoint areas needing work and the extent of their deterioration. You can obtain estimates from contractors for renovation costs to adjust the property’s market value accordingly.
For instance, if comparables show that a renovated home sold for $375,000 but your home needs $20,000 in repairs, you will need to account for this adjustment.
As a potential buyer, inquire with the owner about needed and recent renovations. Request detailed cost information and invoices if possible. A pre-purchase inspection is also essential.
Consult energy bills
Energy bills can provide valuable insights into a home’s insulation quality. Efficient insulation or high energy consumption can significantly impact a home’s value during evaluation.
If recent upgrades have been made to the insulation in walls, floors, doors, and windows, leading to lower energy consumption, the property’s value is generally higher compared to less efficient comparables.
On the other hand, a home with poor thermal performance and higher energy bills will be less attractive on the market, which can negatively affect its value.
Create a list of pros and cons
Consider factors such as proximity to schools, daycares, grocery stores, restaurants, medical services, and parks.
Location plays an essential role in determining a property’s market value. Proximity to a highway, railroad, or a noisy street can be significant drawbacks.
Your evaluation should also address the following questions:
- Is it possible to expand the house?
- Are there municipal regulations that prohibit installing a pool or shed?
- What are the municipal taxes and, if applicable, condo fees?
- Are public transportation options accessible?
- What is the neighbourhood like? Are the residents respectful and do they maintain their properties?
How to determine your home’s price with an expert?
To simplify the process, consider enlisting an expert to accurately determine your home’s market value. Depending on your needs, you have two options:
- Real estate agent
- Certified appraiser
Seek advice from your real estate agent for an estimate
If you’re looking to buy or sell a property, a real estate agent can provide invaluable insights into the local market. They have extensive experience with transactions and a deep understanding of pricing and influencing factors.
Your agent can offer a list of comparable properties that they have recently sold in the area, helping you gauge the market value accurately.
Moreover, if you find a dream home but believe its price is too high or it has significant drawbacks, your real estate agent can be an essential ally.
Hire a certified appraiser for an accurate and professional valuation
For an accurate assessment of your home’s market value, especially for mortgage refinancing or other real estate projects, hiring a certified appraiser is highly recommended. These professionals have the expertise needed to determine a property’s value with precision.
A certified appraiser provides an objective and detailed valuation of your property, along with a comprehensive report that includes supporting evidence to ensure the estimated price reflects current market conditions.
Should I rely on the municipal valuation?
Municipalities conduct property assessments every three years to inventory properties within their jurisdiction. However, this process is not intended to benefit citizens but rather to determine municipal tax amounts.
Relying on municipal valuations to assess a home's value can be problematic for several reasons. Firstly, there is usually an 18-month delay between the city's valuation and the implementation of the new property assessment.
Additionally, in areas with rapidly changing real estate markets, where prices are consistently rising, the municipal valuation may not accurately reflect the current market value.
The importance of properly evaluating a home before making an offer
Accurately evaluating a home is crucial because no bank will approve a mortgage if it deems the property's price significantly higher than its true value. Before granting a loan, your bank will hire a certified appraiser to assess the home’s worth.
Buying a home is already a stressful process, and uncertainty about whether you're agreeing to a fair price can add to the anxiety.
Once you make an offer and the seller accepts, you are committed to the purchase and cannot retract your offer. If you later discover that the home is worth $40,000 less than your offer, you’ll miss the opportunity to allocate that amount elsewhere, such as for renovations, furnishing, or other important investments.
Although some properties may require quick decisions, it's essential to take the time to thoroughly evaluate the home to make a well-informed choice and avoid any future regrets.
Looking for an appraiser for your real estate project?
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