Mortgage Appraisals

Mortgage Appraisals

When do I need a Calgary mortgage appraisal?

If you are purchasing a home you may require an appraisal if CMHC or GE or AIG are not insuring the property. In other words, when you are putting down less than 20% of the purchase price and CMHC or GE or AIG are insuring the mortgage they may go by an appraisal scale they have and not do an appraisal. The cost is reflecting in the application package fee with the insurer.

If you are refinancing or doing an equity take out on your property you will need a new appraisal each time if the last one is older than three month and if the lender you are going through to get your new mortgage likes that appraiser.


When my property is getting re evaluated in this recession, what is it going to based on?

CMHC and Ge have tightened up in the Condo market, so the evaluations are going to be coming in at a lot lower valuation. When there is a lot of product on the market and not a lot of purchasers then it is a buyers market which can cause prices to go down. With the recession going on in Canada and the USA the insurers are being very careful on the evaluation process. The appraisal companies biggest challenge is finding sales in the last 30 to 60 days that they can compare to your house. You will see in the next 12 to 18 months values on refinances being very conservative.

What is one common assumption that consumer do when looking at their home evaluation?

Through the years of financing mortgages the common assumption is that consumer feel that if the neighbors house sold down the street for X dollars their house would be worth more because of square footage or because they have put in new carpet and replace an existing carpet. Sometimes what you are putting into your house is up keep and needed to be done and replacing a existing product with a higher price one is not going to add value to your home.

What is the difference between an appraisal report or a realtors opinion?

An appraisal report is done by a CRA and reviewed by a appraiser with a AACI designation. They have to use the method listed below. The realtor opinion is done by pulling off the current sales and listings in that area. If you are unsure of your house value you can ask a realtor to do an opinion so you now if you are able to look at the refinance needed or you can look at the lasted tax assessment on your property which is usually lower than the true value of your property.

Appraisal Reports


The purpose of an appraisal is to estimate the Market Value of a particular property at the time of the appraisal report.

Scope of the Appraisal

The appraisal report must describe the scope of the work to be completed. The report is completed with information obtained from Land Titles, interviews with and the sales records of realtors and file data. Most often the property is inspected inside and out and measured. If a report is prepared with less than a full inspection, the inspection's depth must be disclosed on the report. Similar properties that have sold or are available for sale at recent dates are compared to the subject. The appraiser analyzes, adjusts, and reconciles property factors like property type, current market trends, location, terms, seller's motivation, price, condition, utility, age and condition. The appraiser then estimates the property is market value.

Objective Estimate of Value

Objective Estimate of Value is the estimate of value provided by a competent, professional appraiser with no vested interest in the property. The appraiser may base the estimate on any of the three approaches to value namely: cost, income, or direct market comparison.

Market Value

Market Value can be defined as the highest market price a property could bring if offered for sale in the open market, allowing a reasonable time to find a buyer who buys with the knowledge of the uses to which it is adapted and for which it can be used. Market value is an expression of the objective idea of value, which maintains that value arises from the prices people are will to pay for commodities, rather than what individuals may think these same people should have paid. It is a fact-based realistic estimate of value.

Appraisal Process

Appraisers have developed a step-by-step process to guide the appraisal process in a uniform way. Complete accuracy iin valuation estimates is, of course, most often unattainable. Nonetheless, the appraisal process assumes it is possible in many situations to search out pertinent information and data to reach a sound estimate of the Market Value - one that flows logically from the market investigations.


An Appraiser's opinion of value may be precise or exact in the context of his or her research and analysis. It may not be exact or precise as it relates to the eventual sale price of the property. Accuracy is a relative concept. In real estate, the measurement of accuracy Is generally determined by relating the value to the sale price.

The Direct Comparison Approach

The market date or direct comparison approach produces a value estimate based on the selling prices, listings or offerings on comparable properties. This type of estimate relies on the Principle of Substitution, which states that an informed buyer would not pay more for a property than it would cost to buy an equally desirable substitute.


In this process, the valuator weighs the similar and dissimilar characteristics between the properties. In this manner the appraiser places himself or herself in the position of a typical buyer in the market. It is important to emphasize that the properties selected for comparison must be similar in most essential respects to the one being appraised. It is necessary, therefore, for the appraiser to gather important and relevant data on the comparable and compare the market relationships with the property being appraised.


The basis of comparison between the subject property and similar properties involves researching several things:

  1. Selling price, asking price or offer on similar properties in the same or competing areas.
  2. Description of land and improvements of each property used in the comparison
  3. Location of each comparable property
  4. Conditions influencing each sale.

In this process the appraiser finds comparable properties that have sold or are listed for sale, or properties on which offers to purchase have been made. Each comparable property is investigated for pertinent information regarding size, units, function, use, condition, age, layout and equipment. Further, the location of these comparison properties is considered analyzed in comparison with the location of the subject property.


The appraiser considers the motivating force behind each sale and the terms of the sale. In many instances it is not possible to know any of the personal reasons for someone buying or selling property and herein lies the weakness in the direct comparison approach.


The price of each comparable property is then adjusted in dollar amounts, or by percentages or factoring, to show the amount the subject would sell for. The range of adjusted selling prices for the subject property is the value range. The appraiser then selects a value figure within the range. The adjustment process is used to determine the price, which a comparable property would have sold for, if it possessed the identical characteristics of the subject property.

Key Consideration in the Direct Comparison Approach

The assembling of data for an appraisal is an important task, and difficult if one does not know where to look for the information. All appraisal offices keep detailed records on property slaes that can help in this task. Real estate boards and agencies often keep details of listings and past sales. Interviewing owners, purchasers, and tenants near the property can provide pertinent information and aid in the appraisal process. The appraiser should, nevertheless, be cautious about using data in an offhand manner. Appraisers often glean good information from newspaper sections dealing with real estate news and classified ads. Public records in the Land Title Offices in the Porvice gives dates, sworn values, mortgages and the like on the title documents. Remember, though, sworn values on title documents do not necessarily reflect actual selling prices. In the investigation, the appraiser is seeking sales or asking prices of comparable properties, conditions influencing each sale, the location of each property, and an ample description of the land and improvements of each property.

Final Reconciliation and Estimate of Value

If two or more approaches to value are employed in an appraisal, each will lead to a omore or less independent estimate of value. Each approach to value therefore, can be considered a sa check against the other. The final value estimate is somewhere between the high and low value indicators. In theory, if an appraiser had complete pertinent data on hand and had processed it carefully, then all three approaches would lead to the same value estimate. However, much of the data gathered by the appraiser cannot be evaluated in precise terms. The phrase often quoted- "appraisal is not an exact science" is appropriate. The best an appraiser can do in using the various approaches to value is to estimate a value from within a range of values.