FREQUENTLY ASKED QUESTIONS

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

Under legislation you are entitled to receive an 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. Governments will often try to resolve the amount of compensation to be paid before the actual expropriation. It is important for you to ensure you are fairly compensated for more than simply market value.

In the case of a partial taking of your property and 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.

How much insurance should we carry on our property?

It is recommended that you first consult with your insurance professional to determine the type of insurance coverage that best suits your needs. 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.

There are two types of insurance coverage: replacement cost or actual cash value. It is important to keep in mind that 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 (regardless of the limit carried and what type of coverage you have in place).

What is our assessed value based on and how do we ensure that we are not paying excess municipal taxes?

Assessed values are an assessor’s opinion of the market value of your property. They are estimated every two years and are presently based on estimated market values from April 1 of the base year.

When you receive your notice of assessment from the municipality, you have up to 21 days to appeal the estimated assessed market value of your property. Taxpayers can appeal themselves or appoint a knowledgeable representative to act on their behalf. It is recommended that business occupants and tenants who receive notices of assessment discuss intentions to appeal with their landlord prior to filing.

Is the estimated market value of my house the only thing influencing how much my municipal taxes will be?

There are two components that determine the how much your municipal taxes will be. The first component is the market value of your 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. It is therefore crucial for you to ensure that the valuation on your property is accurate.

We are considering renovating and would like to know what items will provide the best return upon resale?

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.

We have been trying to sell our home for a while 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 the home. Why is it not selling?

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.

Why is the cost to construct a building not always retained in the marketplace?

The cost to build is not always retained in the marketplace because of depreciation.

Physical depreciation, pertaining to the wear and tear a property receives over time, is the most common form of depreciation. If your property is 10 years old and has a life expectancy of 50 years, then the physical depreciation applicable would be 20%.

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 property 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.

Independent real estate appraisers are key advisers for buyers, sellers, realtors, builders, lenders, and mortgage insurers about the market value of new buildings.

We often hear that it's best to buy the lower priced property in a particular area for future resale. Why is this so?

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. If 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, it is best to own the lower market valued property in an area for maximum re-sale value.

We've recently been approved for financing on a home we intend to buy. Does this mean there was an appraisal completed?

Not necessarily, but it’s possible it was included in the mortgage fee you likely paid. Typically, the lender has to be concerned about your credit worthiness and their exposure to loss in order to require an appraisal.

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.

We have often heard of the importance of pricing as a key factor in selling real estate. Please explain.

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. But what is the right asking price? The best way to determine this is by having an objective market analysis (appraisal) 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.

What is my property worth?

The value of your property and home 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, then 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 into having its value established by an independent professional.

We are considering the purchase of a condo. What are the most important issues?

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.

Location: As always, location is the key to any real estate decision. 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, it is important to consider both the location of the complex, and the location of the unit within the complex.

The Unit: The condo should also fit your lifestyle, and the lifestyle of those who would likely be interested in purchasing it from you in the future. 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? How many units are owner occupied? Is there adequate parking? And how much natural light does it receive? Other considerations should include whether the complex is competently managed, what the condo fees are, whether the fees are sufficient enough to cover common area costs, whether there are major concerns with capital items such as roofing, windows, or pavement, and whether there are sufficient reserves for their replacement.

Purchase Price: Additionally, it is important to determine a fair price for the condo. Make an informed decision based on what you now about the marketplace, and make all offers to purchase subject to an independent appraisal whether you need financing or not.

Sale of Current Property: Finally, if you now own a property, you should know what you are most likely going to obtain in the marketplace for that property. Therefore, an independent appraisal should be obtained before you agree to make an offer on any condo.

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. Prudent purchasers generally make their offer to purchase subject to both an appraisal and building inspection.

Appraisal: 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 all have a significant influence on marketability and value.

Building Inspection: A building inspection is a thorough examination of the physical condition of the structure and its components.

Is appraised value and market value the same?

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 they’re 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.