What is an Appraisal? Vancouver Real Estate Terms
Real Estate Appraisals – A Vancouver Real Estate Definition
A real estate appraisal is a concept that is commonly misunderstood Buyers in the Vancouver Real Estate Market.
With this in mind, I brought in a mortgage expert, Chad Watts of the Mortgage Group to talk to us about Real Estate Appraisals.
What is a Real Estate Appraisal in Vancouver?
An Appraisal is a calculation of the subject property’s (ie the property that a borrower wants to get a mortgage on) value by the Bank or Lender for the Bank or Lenders benefit. (NOT for the Buyers Benefit!)
The Bank or Lender does this to ensure the property is worth the amount the Accepted Offer the buyer has on the property specifies.
For example: The Buyer has an accepted offer of $1.20 on a property and the lender sends an Appraiser to the property to ensure it is worth $1.20.
Appraisals are also done when refinancing properties as well for presale condos when they Complete. We will discuss these concepts in future videos.
Why is an Appraisal Done?
The appraisal is done to protect the lender or bank so that they don’t loan money on a property that has no value or is worth less than the accepted offer on the property. The Lender does this so that if the borrower stops paying their mortgage, the Lender will be able to sell the property to recover the money they lent on it after they foreclose on it.
When a bank or lender gives a borrower a mortgage, the lender by loaning the money, is effectively investing their money in the property and they want to make sure they will be able to get this money back.
If the property doesn’t appraise at the value set out in the accepted offer, the bank will not give the Buyer/Borrower a mortgage.
This is the major reason why we use a Subject Financing Clause when we work with Buyers.
It effectively protects the Buyer should they not get a mortgage on the property they have an accepted offer on.
Isn’t an Appraisal the same as a Home Inspection?
NO! an Appraisal is NOT a home inspection!
This is a very common misconception. A Home Inspection is when a Qualified Home Inspector does a detailed assessment of the condition of a condo building and suite or a single family house on behalf of the Buyer for a property the Buyer interested in purchasing or may have an accepted offer on.
The home inspection is paid for by the Buyer and is for the benefit of the Buyer.
A Home Inspection is done so the Buyer will be aware of immediate and upcoming repairs and maintenance, but importantly to ensure the Buyer is not purchasing a leaky condo, a money pit, or worse.
How much does a Realtor Charge to Help Sell a Home in Vancouver?
Check out this great explanation of Vancouver Realtor Fees!
Looking for Vancouver Presale Condos?
Check out this great Vancouver Presale Condo Map!