The home appraisal process plays a key role in home financing, both for purchasing and refinancing. The lender usually requires a professional third party appraisal of the property to determine lending value. If you are purchasing a home, the appraisal is used to confirm whether the purchase price approximates true market value. If you are refinancing, the lender wants to ensure that the collateral value offered by the property justifies the refinancing loan amount you are requesting.
Canadalend works with all major banks and mortgaging institutions, as wells as unlimited private funds. During the Canadalend appraisal process, it is the actual lenders who request the appraisals on the property. The lender does so to make sure the property is actually worth the money it may be lending you. These lenders require some assurance for the loan they provide.
Common Methods Used for Appraisals
The most common approaches to value property are the Cost Approach, the Direct Comparison Approach and the Income Approach.
- Cost Approach: In this approach, the appraiser will inspect the property and note the type and quality of materials used. The appraiser will then determine how much it will cost to replace the property using comparable materials. After arriving at a replacement cost figure, the appraiser will deduct the cost of depreciation based on the age and condition of the property.
- The Direct Comparison Approach: This approach for appraisal provides the market value of a property by comparing it to values obtained in the open market of similar properties that have sold within the last six months. Some factors used in the comparison include square footage of the property, age of the property, lot size, and property condition. This is the most commonly used method.
- Income Approach: This is used for income-producing properties and is usually used together with other valuation methods. The appraiser will consider the income that a property is producing, as well as potential income a property could produce. Costs of maintaining the property are deducted from the income, giving the appraiser an average annual income for the property.
Should You Worry About the Outcome of the Appraisal?
The Canadalend appraisal process is a very important part of the mortgage process, and your loan could be declined if the property does not qualify as adequate security. Usually, the appraised value is right in line with the asking price. This is especially true when the seller had an appraisal done to determine the asking price, or an experienced real estate agent performed a comparative market analysis to arrive at the price.
Although the appraisal primarily protects the interest of the lender during the Canadalend appraisal process, the appraisal also protects the interests of the borrower. The lender does not want to lend money on a poor investment, but the borrower also does not want to purchase a poor investment. Canadalend puts forth their best effort to ensure that clients are provided with optimal financial solutions.
Our expert staff at Canadalend utilize years of experience and a wide range of strong relationships with experts in the financial industry to provide quality service for clients.