Module 9: Appraisals Flashcards
In the purchase of a home/property, what is the purpose of having an appraisal done?
Appraisals are typically used by the lender in there decision making process on whether or not to lend.
What is the definition of fair market value?
“At any given time, the fair market value of an interest in land is the highest price reasonable expected when sold by a willing seller to a willing buyer after adequate time and exposure to the market.”
What are some of the key factors in determining fair market value?
-Time: value changes depending on when you are selling/determining the market value.
-Reasonable Expectation: The price that might reasonably expected.
-Interaction: Value is determined by the interaction of a willing seller and willing buyer.
-Open Market: There is sufficient time to find a buyer, and the property is offered for sale in the open market.
What is an appraisal?
A real estate appraisal is an independent impartial written opinion of value based on selective market research and using various accepted analysis techniques.
What are the 3 most common types of appraisals?
-Sales Data Only Report (comparable sales analysis, no physical inspection needed)
-Limited-Restricted (Restricted Use) Appraisal Report (exterior examination only, used for when there may some concerns about the area or the property condition, or when little is known about the market)
-Self Contained (Summary Report) (Detailed interior and exterior inspection of the entire property, as well as in-depth information about the neighborhood. Basically a full appraisal)
What are the sections generally found in an appraisal report?
-Property Identification
-Property & Neighborhood
-Site Description
-Improvements - Exterior & Interior
-Scope of the Report, Disclosures and Definitions - Includes an analysis of the property’s highest and best use
-Highest and Best Use
-Assumptions and Limiting Conditions
What are the 3 different processes used to value a property?
-Sales Comparison Approach
-Cost Approach: Value estimate based on land value, cost to replace the building minus depreciation
-Income Method
What are the different professional appraisal designations?
-Appraisal Institute of Canada (AIC)
-CRA: Canadian Residential Appraiser
-AACI: Accredited Appraiser Canadian
Institute
-Canadian National Association of Real Estate
Appraisers (CNAREA)
-DAR: Designated Appraiser Residential
What are automated valuation models (AVMs)?
These are computer programs that provide real estate market analysis and estimates of value. One key thing to remember is that an AVM is an estimate not an appraisal.
What is Teranet’s Purview?
Purview is a nationally automated property valuation and fraud detection solution. It is designed to be used by financial institutions, mortgage lenders and insurers.
What is MPACs Automated Valuation Model?
MPACs AVM is a real time estimate of market value for over seven million residential properties in Ontario, BC, Quebec, NB ,NS NFLD and Winnipeg.
What is Landcor?
The only automated valuation provider with access to detailed information for all 1.9 million properties in BC. Property database updated weekly.
What are the main mortgage underwriting criteria?
-Credit Bureau Score
-GDS and TDS Ratios
-LTV Ratio
-Other information
-Appraised Property Value
After the underwriter has reviewed the loan package there can be 5 potential outcomes:
- Approving the loan
- Approving the loan with conditions (most common response)
- Suspending the application (when additional info is needed to make a decision)
- Amending the loan terms
- Declining the loan application
What is the definition of fair market value (FMV)?
At any given time, the fair market value of an interest in land is the highest price reasonably expected when sold by a willing seller to a willing buyer after adequate time and exposure to the market.
