Dan Brewer is incoming president of AIC and a senior appraiser at Appraisers Canada Inc.
Real estate bidding wars are everywhere in the super-heated Toronto and Vancouver property markets, with sales that can end up hundreds of thousands of dollars above asking prices.
It's a bonanza for sellers, with head-spinning multiple offers giving them a tidy sum of extra cash. For buyers, the process of finding a home is frenzied and emotional.
Where all this volatility leaves them – not to mention the state of the real estate market and the Canadian financial system – is a concern for the Appraisal Institute of Canada (AIC). The organization is encouraging property owners to engage professional appraisers to get unbiased, independent opinions of property values and optimal list prices.
"The more information you have in your hand, the better off you're going to be," says Keith Lancastle, chief executive officer of AIC, a self-regulating organization that has more than 5,000 members across Canada with Accredited Appraiser Canadian Institute (AACI) and Canadian Residential Appraiser (CRA) designations. "It's prudent to make these kinds of decisions with both eyes open."
AIC members last year performed roughly one million residential appraisals in Canada worth a total of more than $568-billion, an increase of more than 37 per cent from 2014. Sales have increased and a higher percentage of sales are appraised to determine values on which to base mortgage financing, Mr. Lancastle says. "If you are in a multiple offer scenario and overpay by $150,000, you should not expect the lender to underwrite that emotion. An appraisal provides an unbiased market value that relies on facts and not on emotion."
Dan Brewer, incoming president of AIC and a senior appraiser at Appraisers Canada Inc. in the booming York region north of Toronto, says that under guidelines set out by the Office of the Superintendent of Financial Institutions, on-site appraisals are required to ensure that lenders do not advance an amount larger than a property's value.
“Bidding wars skew market values, and those who pay out of whack prices should be prepared to pull a lot of money out of their jeans. Cost is not synonymous with value.” |
Dan Brewer is incoming president of AIC and a senior appraiser at Appraisers Canada Inc. |
You may have overpaid to get your dream home but "you can't finance your dreams," Mr. Brewer comments, noting that much of the escalation in homes price in Toronto and Vancouver comes from a lack of inventory, time pressures and the fact that buyers and sellers are often "making decisions without knowing all the facts." Bidding wars skew market values, and those who pay "out of whack" prices should be prepared to "pull a lot of money out of their jeans" and to consider whether they can recover that amount if they sell, he notes. "Cost is not synonymous with value."
AIC-designated appraisers undertake comprehensive curriculum, experience and examination requirements and are experts in assessing the value of a property, while real estate agents are experts in selling and purchasing property, and home inspectors determine a property's structural integrity, Mr. Brewer explains. An appraisal report helps property owners better understand a market's sales and listing history, the exposure time to sell a property, supply and demand for similar properties, structural characteristics, assessment data, title restrictions, zoning and land-use controls.
"You're interpreting the marketplace," says Mr. Brewer, noting that qualified appraisers "are an integral part of the process," helping homeowners do everything from understanding their equity positions to evaluating the value of particular upgrades they opt for. "We quantify those things, we monitor them, we measure them, we give guidance and direction."
Mr. Lancastle says that in a larger sense, appraisals ensure that there are true values in the marketplace. "We are helping to protect the financial system and Canadian consumers." He adds that AIC members also do appraisals for purposes such as estate planning, property tax assessments and appeals, mortgage refinancing and to help homeowners plan for and follow up after renovations.
This content was produced by Randall Anthony Communications, in partnership with The Globe and Mail's advertising department. The Globe's editorial department was not involved in its creation.