Frequently Asked Questions

Q: We have had our property expropriated. How do we ensure we obtain fair compensation for our loss?

A: Under legislation you are entitled to receive that amount which places you in a position where you are no worse off than before the expropriation. In the case of a principle residence if the home is to be taken or severely negatively affected, a house for a house is often the compensation. Most often government will try to resolve the amount of compensation to be paid before actual expropriation. It is important for you to ensure you are fairly compensated for more than simply market value. Other issues such as in the case of a partial taking of your property, the loss in value to your remaining property, your costs to obtain fair compensation along with other items must be considered. In addition to valuation advice, legal advice is strongly recommended in such matters.

Q: What is the right amount of insurance we should carry on our property?
A: It is recommended that you first consult with your insurance professional to determine the type of insurance coverage that best suits your needs. There are two types, replacement cost or actual cash value. It is important to keep in mind, the co-insurance clause contained in your policy makes you responsible for any shortfall in your coverage. Conversely, you would not be paid any more than replacement cost or actual cash value, which ever type of coverage you have in place and regardless of the limit carried. The amount of insurance coverage should be determined by a qualified independent appraiser. Establishing the right type and amount of insurance that suits your needs is very important when protecting your most important assets.

Q: On what basis is our assessed value based and how do we ensure that we are not paying in excess of our fair share of municipal taxes?
A: In Manitoba, assessed values are estimated by assessors every two years and are presently based on estimated market value on April 1 of the base year. Every year, taxpayers have the opportunity to appeal the estimated assessed market value on their property when they receive their notice of assessment from the municipality. There is a time limit of 21 days to file a written appeal with the municipality. The tax payer can appeal themselves or appoint a representative to act on their behalf who is knowledgeable with the issues. Notices of assessments usually arrive in the last quarter of the year.

Q: We recently received a Notice of Assessment from our municipality. What can we do to ensure we are not paying any more then our fair share of municipal taxes?
A:The notice of assessment provides the opportunity to ensure you are not paying any more than your fair share of municipal taxes. The assessed value is the assessors opinion of market value for the property. This opinion can be reviewed by appealing and returning it within the 21 days filing period. It is important to remember that it's not what your property is worth today; rather what it was worth April 1, 2010, the base or effective date of the current municipal assessment. As the type of real estate varies, so do the complexities of the valuations or assessments. The more unique the property, the more difficult it is to estimate market value. There are two components that determine the amount of municipal taxes you pay. The first component is the market value of the property which is estimated by the assessment staff. The second component, the mil rate, is established annually by council based on municipal operating budgets. Taxpayers consequently have very little control over the mil rates, except maybe in an election year. It is therefore crucial that you ensure the valuation on the property is accurate. Not only property owners pay municipal taxes. Business occupants or tenants also receive notices of assessments and have the right to appeal. It is recommended that tenants discuss their intent to appeal with their landlords prior to filing.

Municipal taxpayers can appoint a knowledgeable representative to act on their behalf who is familiar with market values and the assessment process in the area.

Q: We are considering renovating and would like to know what items will provide the best return upon resale?
A: Renovating is a very personal, complex area and every situation has to be looked at individually. However, the best return on resale in renovating is cosmetic items such as painting and decorating where there is a limited capital outlay. Surveys by the Appraisal Institute of Canada have shown investing in the kitchen area to have the best retained value, followed by bathrooms. Our site contains a link to the Institutes Renova software to provide specific value returns on various renovation projects. Be particularly careful in renovating with respect to resale value, if the property is now in the upper range of value for the area and involves a large capital outlay. Remember, location, location, location.

Q: I understand the Appraisal Institute has recently surveyed its members concerning the best payback on renovations and trends. What are the results of this survey and why should real estate appraisers be consulted on renovation payback and trends?

A:  The Appraisal Institute of Canada has developed RENOVA, an interactive web-based guide to the value of home improvements. RENOVA is designed to give consumers a better idea of the return on investment they can expect for a variety of home improvements. RENOVA does this by providing a payback value range derived from the cost of the improvement expressed in dollars. For example, a homeowner might indicate that he or she is considering spending $10,000 on remodeling the kitchen. RENOVA will then provide a payback amount of between x and y dollars for that particular renovation. Homeowners can choose from among the 20 most popular renovation improvements, identified by a survey of AIC members.

Our goal in developing RENOVA was to determine, in the informed opinion of Canada's professional real property valuers, what effect home improvement projects have on the value of resale houses.

RENOVA also ranks the renovation trends, in terms of which provided the highest payback potential.

Consumers should be aware that RENOVA is a guide, which provides ranges. Home values and returns on renovation investments are dependent on so many factors such as the location of the property, i.e. province, rural/urban, the neighbourhood and notably important is the quality of workmanship and materials. For a comprehensive valuation of your home and or renovation project, an accredited member of the Institute should be consulted for a cost-benefit valuation. An AIC valuator can identify the value of your home prior to the renovations being undertaken and provide a projected valuation based on your anticipated renovation plans. Homeowners could save themselves a lot of time, expense and heartache by calling an appraiser first, even before the designer, contractor and architect.

Considering multiple home renovations? Click HERE to use the all-in-one worksheet.

Q: Why is the cost to construct a building not always retained in the marketplace?
A: The cost to build is not always retained in the marketplace because depreciation 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%. This form of depreciation pertains to the wear and tear a property receives over time. Depreciation may also exist in two other forms, they are; Functional and External.

Functional depreciation may be a poor or inappropriate floor plan. For example, an individual may chose to build a one bedroom home. The majority of the buyers in today's marketplace 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 cost and value could be attributed to functional depreciation. External depreciation is a loss in value caused by an 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, hospital, etc. The downturn in the local real estate market during the 1990's, can also be attributed to external influences or depreciation. Demographic changes in the population base and high unemployment led to decreased demand in most sectors of the real estate market. Properties were selling for fractions of the replacement cost and limited speculative construction was occurring. As the economy improves and new markets evolve, increased demands will push market values leading to a growth in construction once again. Independent real estate appraisers are key advisers for; buyers, sellers, realtors, builders, lenders and mortgage insurers in this new complex market, where making the wrong choices may be costly.

Q:. We often hear it's best to buy the lower priced property in a particular area for future resale. Why is this so?
A:  Real estate value, like water, seeks its own level. For example assume the range of value in your area is between $100,000 to $125,000,and your property has a market value of $100,000. The overall market value in your area increases on average by 5%, your property will out perform the average increase in the market by the greatest margin. If the overall market dropped in value, your property will be the least negatively affected. Therefore, everything else being equal, it is best to own the lower market valued property in an area for maximum re-sale value.

Q: We recently have been approved for financing on a home we intend to buy. Does this mean there was an appraisal completed?
A: Not necessarily. The lender has to be concerned about your credit worthiness and their exposure to loss. You were most likely required to pay for mortgage insurance to protect the lender in case of default and in addition an application fee which may not have included an appraisal of the property. One of the ways to protect your interest is to insist the clause "subject to the appraised value meeting or exceeding the agreed purchase price" be in the offer to purchase agreement and go over that appraisal document with the appraiser, well before the commitment to go forward with the transaction occurs. The purchase of a home is a very emotional time, therefore it is important to obtain objective advice. Always remember, buyer beware.

Q: We have often heard about the importance of pricing as a key factor in selling real estate. Please explain?
A:  The asking price is the key factor in obtaining the most for your property. Therefore it is imperative you properly price your property to the market. This is simply said but what is the right asking price? The best way to determine this is by having an objective market analysis completed by someone who has no vested interest in the property. This opinion of market value should identify not only the most recent relevant sales data in the market but also current competitive listings on the market.

Q: What's my property worth?
A: 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, 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.

Q: We are considering the purchase of a condo. What are the most important issues?
A: As always location is the key to any real estate decision. Always buy with the consideration of how long will I own the real estate and what will likely be its resale value. With respect to condos, not only the location of the complex is important but the location of the unit within the complex is also key. The condo should fit your life style. Does the unit have a functional kitchen, does the bathroom(s) have sufficient space, does the unit have adequate laundry facilities, is it sound proof, are the neighbors compatible, how many units are owner occupied, is there adequate parking and how much natural light does it receive? Practical areas such as: is the complex competently managed, what are the condo fees, is it sufficient to cover common area costs, are there major concerns with capital items such as roofing, windows, pavement and are there sufficient reserves for their replacement should be known. Paying a fair price is the next most important issue and probably the most complex. Determining fair price should always be based on an informed buyer knowing the market place. It is not always clear what other purchasers have paid. Make an informed decision and make all offers to purchase subject to an independent appraisal whether you need financing or not. Finally if you now own a property, you should know what you are most likely to obtain in the market place for that property. Therefore, an independent appraisal should be obtained before you agree to offer on any condo. David Foote of BOOM, BUST and ECHO fame has stated we are just as the beginning of the condo living era due to the demographics of the population. If you intend to buy, make sure the location and unit is for you, know common area issues, pay fair market value, buy with a thought of resale and know the market value of your existing property before you do anything.

Q: Do we need an appraisal, if we have had a building inspection completed?
A: 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, 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 appraisal and building inspection.

Q: Is appraised value and market value the same?
A: Appraised value is an opinion of market value by an appraiser. Market value is that amount a vendor agrees to accept for their property, but not all that has been agreed to as purchase price between a buyer and seller is market value. Appraisers utilize properties which have sold, to interpret what the property their appraising is worth. Not all appraised values are market value, however, not all agreed purchase agreement are market value either. The appraiser interprets what the market value is most likely to be. The more unique the property is, the higher the margin of error. In residential appraising a typical example is a corporate transfer where two appraisals are obtained. The employee is guaranteed a price for the property based on the two appraisals, however, the appraisals have to be within 5% of each other. If they are more than 5% apart, a third appraisal is obtained.</p>

Q: We have been trying to sell our home for some time now and have had no serious offers. We purchased it five years ago and completed renovations to suit our needs. All we want back is our purchase price and the cost of renovating our home. Why is it not selling?
A: There are a number of possible reasons why you can't get back your investment. You may have paid too much when you purchased the home five years ago. You may have bought your house at the height of the market. You may have overspent on renovations, therefore, the marketplace is not prepared to pay what you spent. Your renovations may have been completed to suit your needs and may be so specialized that few potential buyers find them appealing. Generally, the most common reason for a property not selling within a reasonable marketing period is that the property listed for sale is in excess of its current market value. The asking price should be marginally above market value. If the property has been overpriced for some time you have probably missed the market and it may be best to take it off the market and re-enter later, at an appropriate asking price. An overpriced property often sells below market value as genuine purchasers are scared off by the excessive price, and may be absorbed elsewhere in the market place. Establishing the right asking price for a property is the key to obtaining maximum return, within a reasonable marketing period. Therefore, it is imperative you price your property to the market. The best way to determine this is by having an objective market analysis completed by someone who has no vested interest in the property, a professional real estate appraiser. This opinion of market value should identify not only the most recent relevant sales data in the market, but also current competitive listings in the market area.