These two services are very similar in nature, but understanding the difference between an appraisal and market evaluation is important. No matter the circumstance, whether you’re a buyer or seller, you should inform yourself of the options and services available to you through the salesperson you’ve selected.
A market evaluation or, comparative market analysis, is to determine a realistic listing price for your home. This is done by comparing properties that are similar in the following ways:
- Square Footage
- Supply & Demand
- Updates to the Home
- Repairs Needed
Your sales representative will compare sold, active and expired listings that meet the same criteria as your property, and in turn, come up with an asking price. There can sometimes be a bit of confusion in regards to how a home should be priced. Often, potential sellers are under the impression that if their home is an 1,800 square foot, 3 bed, 2.5 bath bungalow, that it should be listed identically to another home with the same specs. Unfortunately, real estate isn’t as easy as comparing apples to apples. As mentioned above, there are many factors that contribute to the increase in value, as well as a decrease when comparing your home to similar properties.
An appraisal is a professional opinion on a home’s value, one that can only be determined by a licensed appraiser. When a buyer requiring a mortgage is purchasing a home, an appraisal needs to take place to show the buyer’s lender that the home is indeed worth what is being paid for it. To determine the homes current market value, the following factors apply:
- Property Features & Amenities
- Square Footage
- Number of Bedrooms & Bathrooms
While market evaluations are almost always complementary, an appraisal does come at a cost. An appraisal in Ontario will cost you anywhere from $350 – $700, although it could be more or less. The cost of the appraisal depends on size, possibly it’s geographic region, as well as whether or not it’s considered a luxury home/estate. Who pays for the appraisal depends on what the appraisal is for. In this case, we are speaking in terms of a buyer wanting to purchase a home and they require financing to do so. In most cases, the lender is requesting the appraisal, and in the end, it is usually the borrower that covers this cost. Although, some financial institutions cover this for their clients.
As you can see, the process to obtain both the selling price of the home and it’s current market value are similar, but the reasoning behind each of these services is nothing alike. Always ask your sales representative if you are unsure of the services they offer, as well as address your concerns regarding the services of other professionals related to your real estate transaction.