appraisal on your home

When purchasing a home in the GTA it is often required to get an appraisal on your home from the lender. The reason that lenders request an appraisal of your house is to make sure that the house is worth what you’re paying prior to releasing the funds, often (especially during bidding wars) a buyer might pay more than the bank is willing to lend for that property.

When will a bank request an appraisal on your home?

An appraisal will typically occur after the property you are purchasing has firmed up on the conditions. The lender will call your agents brokerage, or the listing agents brokerage and arrange a time to come into the property and assess its value.

During their visit to the property they will take notes of the property and gather information on its features, size and finishes, which they will then compare to recent sales.

Why do banks request and appraisal on your home when you are already pre-approved for that much money?

There is a big difference between the value of a home and the amount of money you were approved to purchase a home for.

let’s say you are approved for $1000000 with 20% down. That would mean you have a $200,000 down payment and the bank would fund the remaining 80% amount of $800,000. If the bank appraises the home at $900,000, they would only be willing to fund 80% of that amount, which would be $720,000…. Leaving an $80,000 difference!

Having an appraisal on your home come in below the price you purchased it for could be devastating. Unless you have the required funds to make up the difference, you would unlikely be able to purchase the home and have to walk away from the purchase resulting in a potential lawsuit.

Now of course we wouldn’t want that to happen so let’s go through some key steps to make sure the appraisal on your home purchase comes through at at or above the price you paid.

Making Sure Your Home Appraisal is a Success


  1. Don’t overpay in the first place

This seems like a very easy answer! When you are out purchasing a home your real estate agent should be advising you of the comparable sales in the area prior to submitting an offer. What that will do is establish a price point that would be reasonable to pay for that property. At the same time, this protect you as a consumer because the purchasers of the sold homes have likely gotten financing from banks. Essentially, banks are seeing value and appraising the homes. What it also does is provides data for an appraiser, who will see those same sales and use them as comparables when appraising your home.


  1. Have supporting data

While appraisers from the bank do you have access to a lot of data they don’t have the exact same data as we have on our real estate board. For instance, they might be comparing a sale with a 20 foot frontage to your purchase that has a 30 foot frontage and not factoring that into their pricing.

Some other considerations that might be overlooked by an appraiser are the amount of washrooms that are in the home, the square footage of the home, finished vs. unfinished basement and other attributes which contribute to the sale value of a property.

Your real estate agent should be able to provide a portfolio of comparable sales and create a market analysis that the appraiser can use as a reference point. It’s not to say that they will use all of the information provided, but it will create some more insight into their reasoning.


  1. Be Present

It’s always advisable for a real estate agent to be present during the appraisal of your home. Showing up with a cup of coffee sure does contribute to an appraiser being happy:) Also, if they have any questions while they’re walking through the house, having an agent be there to address it in person is extremely valuable.


  1. Book it in the Morning

I’m going to get a little psychological here. When are you most motivated to do your work. first thing in the morning or after you just had a big lunch? We are all at our best at the start of our day and then our willpower and motivation starts winding down in the afternoon. Get your appraiser in the house when they are starting a fresh work day and haven’t spend the previous four hours getting frustrated and wanting to end their day asap. Combine that with the cup of coffee and you are lined up for the best possible outcome.


  1. Have a pre-existing relationship

Most real estate agents have relationships with various lenders. If you are working with a lender who was recommended to you by your agent, they will likely have built up a level of trust and rapport with one another. While they can’t do anything illegal (I hope) there is a higher likelihood that an issue could get addressed quickly and a lender will do more to get something done to make sure a business relationship with an agent stays in good standing.

How can you protect yourself if the appraisal on your home comes in lower than what you paid?

While the above points will help put you in a position to maximize the appraised value of your home, there is no guarantee that the bank will appraise it at your purchase price. With that said, you can do a few things to make sure you are still able to close on the property.


  1. Have a contingency fund:

It is never recommended to buy a house at your maximum approval price. Having a small buffer will create a little wiggle room in your down payment, which can be used towards making up a potential shortfall in the financing.


  1. Know all of your options in advance


Do you have access to RRSP’s, some alternative savings accounts, the tried and tested bank of mom and dad as a back up? If you know that you can manage in the event an appraisal comes in a little low, then you can rest easy.


  1. Try and get an appraiser to come in before the financing conditions expire?

It’s a little odd that an appraisal occurs after you have waived your conditions on a home. We like to put the fire under our appraisers, often offering to pay a premium to have them come as soon as possible. That way, if there is an issue, you are already prepared before waiving your conditions.


  1. Add a condition in your offer on an appraisal

Similar to the 3rd step but rarely used. You can add a condition in your offer on a home for an appraisal…. Completely separate from a financing condition.

Granted, a lot of agents would advise their sellers not to agree to that (because it can tie up a house longer than the common 5 banking days) but it would help you in the long run if you are concerned. I would only recommend this option if you have a strong inclination based upon the supporting sales data, that your home may be at risk for not appraising at the price you paid.

In my eight years or trading real estate there’s only been one time where i’ve seen a home appraised under the value or price that was paid. Full disclosure, that was a property that I purchased for myself and was definitely the highest price ever paid (at the time) for a condo in the building I bought in.

As long as you have the right people guiding you in your purchase and you are following all the steps outlined above, you should have no worries about the appraisal of your home. There is nothing more important than having a good real estate agent and lender working for you.

If this article hasn’t given you a complete scare about buying your next house, feel free to browse one of our guides for buyers.

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