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Questions & Answers
What is my property worth?
This is the most common question asked and the answer is best obtained by having an independent appraisal completed. An appraisal consists of a thorough property inspection, location analysis and an investigation of relevant market data, and equating that information into an indication of market value for the property. Your property's value is often the cornerstone of your financial well-being and consideration should be given to having its value established by an independent professional. - Jerry Kirkland, AACI, P.App
We are considering renovating and would like to know what renovation projects will provide the best return upon sale?
Renovating is a complex area and every situation has to be looked at individually. The best return on resale is cosmetic items such as painting and decorating where there is limited capital outlay, according to the Renovation Payback Study completed by the Appraisal Institute of Canada. Click here for the online study which indicates refurbishing the kitchen and bathroom as the most cost effective projects.
Care should be taken not to overly personalize the renovations and adversely affect the property's function or market appeal. Be particularly careful when renovating if the property is in the upper range of value for the area and involves a large capital outlay. Remember, Location, Location, - Jerry Kirkland, AACI, P.App
Why is the cost to construct a building not always retained in the marketplace?
The cost to build is not always retained in the market place because of depreciation, which comes in many forms.
Physical depreciation is the most common form of depreciation, with most property owners having a basic understanding of how this principle applies. For example, if your property is 10 years old and has a life expectancy of 50 years, then the physical depreciation applicable would be 20 percent. This form of depreciation pertains to the wear and tear a property receives over time. Depreciation may also exist in two other forms, namely functional and external.
Functional depreciation may be a poor or inappropriate floor plan. For example, an individual may choose to build a one-bedroom home. The majority of the buyers in today's market-place appear to demand a minimum of two bedrooms and there is generally an ample supply of these properties. Therefore the market will not pay the cost to build a home with a one-bedroom layout. In this instance, the difference between the cost and value could be attributed to functional depreciation.
External depreciation is a loss in value caused by external influence to the property. For example, a residential property located adjacent to a non-compatible use such as a gas station or night club may be negatively affected by its close proximity. External depreciation may also apply if the economy of a town has been negatively affected by the closure of a mine, fish plant or hospital. -Jerry Kirkland, AACI, P.App
Do we need an Appraisal if we have had a building inspection completed?
An appraisal and a building inspection should not be confused as serving the same function. An appraisal is an opinion of a property's market value. While the physical condition of the property is critical, the appraiser also has to consider subjective issues such as location, design/function and supply and demand, which have a significant influence on marketability and value.
A building inspection is a thorough examination of the physical condition of the structure and its components.
Prudent purchasers generally make their offer to purchase subject to both an independent appraisal and building inspection. -Jerry Kirkland, AACI, P.App
When is the best time of the year to be in the real estate market and what are the most important issues involved in obtaining my best deal?
The time of year depends on whether you're a buyer or a seller. Typically the best time of the year to sell is the summer, when the number of buyers is usually the greatest.
Conversely, from a buyer's standpoint, the best price can often be negotiated in the winter, when the least number of other buyers are in the market. You should also be aware, however, that property inventory is usually at its lowest in the winter and you may not be able to get a good look at the property's exterior, in particular, the landscaping.
One consideration is to sell in the summer, rent during the fall and buy in the winter, this approach would, however, involve appreciable costs and frustrations around two moves.
Aside from the time of the year, buyers and sellers have to educate themselves for one of the most important investments of their lives. Sellers should seek the most informed and unbiased opinions of the market value of their property through qualified appraisals. In addition an appraisal could be provided to the prospective buyer to assist in formulating an agreement and for financing purposes.
Buyers should always include on offers to purchase the phrase "subject to the appraised value being equal to or greater then the agreed purchase price". You should insist on obtaining the appraisal before closing and, if the lender doesn't need an appraisal, have one completed for your own security and peace of mind. -Jerry Kirkland, AACI, P.App
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