What’s the difference between a home appraisal and a home evaluation? We can help you understand the key differences of each.
Your Home’s Current Worth
With the recent changes in the world markets in general and the real estate market in particular, how do you actually know what your home is currently worth? With a home evaluation by a REALTOR® or through an independent appraiser’s report.
Whether it’s for financial reasons, or you’re thinking about moving, or even if you’re just curious, getting an accurate estimate of what your home is worth is definitely a smart thing to do from time to time.
There are several benefits to getting an estimate of your home’s value including determining it’s fair market value, assessing the value of home improvements, setting a sale price of your home, calculating it’s current equity, or simply to plan for the future.
There are typically 2 reliable ways to go about obtaining the value of your home:
- A free home evaluation from a licensed REALTOR®
- A full home appraisal from a certified independent appraiser
What you intend on doing with this information will determine which one you should choose. Are you trying to refinance your mortgage? Are you planning on selling your home soon or in the future? These are the types of questions that need to be answered before choosing one and we explain the differences between the two services below.
A Free Home Evaluation from a REALTOR®:
A home evaluation is used if you’re considering selling your home
The easiest and most cost effective way to have your home value properly assessed is to obtain a free home evaluation from a licensed real estate agent. They have first-hand knowledge of the local market, which houses have recently sold, what they sold for, and what prices houses are most likely to sell for in the future.
Agents base their evaluation on a number of factors including comparative homes that have sold and for what price. They’ll research for homes that have the same relative size, number of bedrooms, bathrooms and finishes as yours, and provide you with a Comparative Market Analysis report (CMA). This report will give you a proper range of what you can expect your home could sell for if listed for sale today.
Remember the residential real estate market is always changing.
If you’ve had a home evaluation done by a REALTOR® in the past, it may no longer reflect accurate data on what you should expect to get if you sell your home today. You should request an updated CMA from your REALTOR® when you’re serious about putting your home on the market.
Pros of a Free Home Evaluation:
- Successful real estate agents know the market incredibly well, and regularly works with a high amount of inventory.
- The service is usually free if you’re the seller.
- Your home’s individual features and finishes are evaluated.
- It’s quick. In one visit you and your agent will discuss your home’s features—they’ll look around each room, take notes, take pictures and use them as a starting point for the evaluation.
Cons of a Free Home Evaluation:
- Not all REALTORS® are created equal and the information you receive from one agent could substantially differ from that of another.
- Agents with bad intentions may give you inflated values to tempt you into hiring them. To avoid this ask for actual comparative sales to back up what they’re promising.
- This type of evaluation isn’t suitable for refinancing a mortgage or for legal purposes but it’s a perfect framework for starting one.
A Certified Home Appraisal:
This type of evaluation would be used if you are trying to refinance, secure a mortgage, or for legal purposes
A professional appraiser is an independent, 3rd party person that is hired to do an appraisal on a property for valuation purposes. They may also be a REALTOR®, but in this capacity they are strictly working as a totally independent entity who is paid for providing a report on the property.
The cost of appraisers can vary from city to city and you are required to pay for the appraisal up-front.
An appraisal can be used to determine a home’s value for a divorce settlement, a estate sale, or an array of other financial purposes.
Pros of a Certified Home Appraisal:
- You’re paying for the service, so there’s no sales pitch. The appraiser simply gives you the report when it is complete.
- There’s no motivation to tell the home owner “what they want to hear“, so you can feel confident about the results.
- A certified appraisal can be used for legal purposes as is an unbiased evaluation of your home and property.
Cons of a Certified Home Appraisal:
- Appraisers may not take the time to discuss their findings with you. They will base their evaluation entirely on what they can see in the home – and may not necessarily know about all the hidden upgrades you’ve done on the home.
- Appraisers are people and still subject to their biases. Appraiser who are familiar with your city and the types of houses in your neighbourhood can provide more accurate evaluation.
Beware of Online Automated Home Evaluations!
Automated online home evaluations are a waste of time and money. You may see ads that claim to provide instant home evaluations online but beware. A computer will never be able to provide the true value of a house without seeing it.
No matter how much advertising is used to push their service, (even if it’s a real estate brokerage) and just because they use buzz words like algorithm, data points, or advanced AI technology, these programs will never be able to output a truly customized and accurate market home evaluation without seeing the inside of your home in person.
An automated appraisal could seem really convenient at first, but when it comes to a certified appraisal there’s nothing like paying for the real deal. And when it comes to finding out the real value of your home, it’s just something that you have to get up and get done. It’s so easy when you put it in the hands of a REALTOR® too.
Our advice is to speak to someone face to face—a person who takes the time to actually determine what your home is worth before doling out useless sales estimates.
What REALTORS® and Appraisers look for when evaluating a home
First, they will both do extensive research on your home and neighbourhood:
- The age of the home
- The square footage
- The number of bedrooms and bathrooms
- Analyze the home’s tax assessments
- Consider any other relevant features of your home
Next they’ll both look at the comparative sales of similar homes from the neighbourhood:
- Homes in the same neighbourhood and same street
- Houses in the same age range
- Same square footage, number of bedrooms and bathrooms, etc.
- Same school zones
- Any other boundary that will have a direct impact on the home’s value
Finally, they’ll both assess the finishes, upgrades and features your home boasts and what they’re worth:
- The number of quality of upgrades done
- The home’s style of décor & quality of finishes
- Amenities like a pool, decks, additions etc.
- Age and condition of major systems, e.g. the roof, windows, HVAC, etc.
Some Final Advice & Guidelines
Here are a few important guidelines to keep in mind regarding upgrades you’ve done on your home:
- You can’t always expect a dollar-for-dollar return on investment with your home’s upgrades.
- Some upgrades matter more than others (e.g. a new kitchen or basement has a higher upgrade ROI than a new eavestrough or furnace)
- What one neighbourhood prefers in upgrades differs from another – that’s why it’s important to hire someone familiar and local to the area.
It’s Smart to be Informed!
Regardless of whether you’re seeking a home evaluation from a real estate agent or an appraiser, I’m glad I was able to explain to you what your options are. Feel free to talk to The Kate Broddick team of REALTORS® when you’re ready and we’d be more than happy to make sure you obtain the exact information need when it comes to evaluating the value of your house.