The 411 on appraisals

Here is a great update from one of our favorite mortgage specialists:

Appraisals are becoming a very hot topic so perhaps I can refresh you on the process:

Appraisals are mandatory on almost all properties with 20% or more down payment. Reason being is that the lender cannot go to the insurer (CMHC) and see if they agree with the value, therefore we have to send someone out there and inspect the property. Sometimes rarely you will see an auto-valuation by the banks (Scotia does this), but almost always now you'll see an appraisal request.

Some lenders allow me to use "my" preferred appraiser, some mandate I order on an anonymous 3rd party system. Some ask for TWO appraisals on properties over $1M and lend on the lower of the two if there's a discrepancy. Ouch!

Suffice to say I am not seeing many appraisals not hit the market but it is definitely happening especially if there are no comparables. If no comparables are available, some appraisers are allowed to use time-adjustment which is basically adding x% of value based on the timing since the last sale (say it was over 6 months ago). One of my top appraisers I just spoke to said over 95% of properties ARE appraising, so we are still in relatively good shape here.

However, I can't stress this enough. ALWAYS let's have a chat about the property before you make any offers. It'll save us a lot of heartache to get an assessment of value from the appraiser AND to have that "what-if" conversation with our buyers to make sure there is some back-up in case of shortfall.

Thanks for reading!

Jake