26 Mar What are Appraisals and When Do You Need One?
What are Appraisals and When Do You Need One?
When you are buying a property in Ottawa and surrounding Areas, one of the things that will likely be required is an appraisal of the property. What are appraisals and why are they needed?
- An appraisal required by a lender is a document that is used to determine the value for lending purposes. Different lenders have different requirements. An appraisal completed for an individual may differ from an appraisal completed for a lender and will likely not be accepted by the lender.
- Some lenders have policies that require the completion of an appraisal if the value of the mortgage is less than or equal to 80% of the suggested property value (even if that number is as low as 20%!) Some lenders will run the submitted value through an automated valuation modeling system and if the value is supported then no appraisal is required.
- Appraisals are rarely required for high ratio mortgages (down payment less than 20%)
- Lenders pay close attention to property details. Comments on the MLS listing that indicate the possibility of issues with a property often trigger an appraisal request.
- Appraisals are normally paid for by clients and payment is required prior to the appraisal being scheduled. The cost varies with location and the nature of the property as well as whether the request is a rush. It is possible to have an appraisal completed within a five day condition period but that would depend on how busy the market is, and may command a higher fee.
- Appraisal values can be challenged but may not be successful. A client may challenge if they disagree with the comparables that the appraiser used.
- The mortgage is based on the lower of appraised value or purchase price. A lower value does not mean that the mortgage will not be funded but the buyer may need a higher down payment.
- It is very important to work with your mortgage provider to help book the appraisal appointment as soon as possible to ensure nom delays in receiving the report, which in turn could affect the closing date.
Whether purchasing or selling a home in Kanata, Stittsville, Barrhaven and greater Ottawa we are here to guide you through all of the different stages. We are always happy to assist and answer any real estate questions you have!
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Thank you to Reni McNeil, Mortgage Brokers Ottawa, for providing some helpful information.