Financing & Refinancing Appraisals
Professional Real Estate Appraisals for Mortgage Financing & Refinancing
Whether you are purchasing a property, refinancing an existing mortgage, accessing equity or arranging new financing, a professional real estate appraisal may be required to establish the property’s current market value.
Lenders use real estate appraisals as part of their lending and risk-assessment process. An independent appraisal provides a well-supported opinion of market value based on the property’s characteristics, relevant comparable sales, current market conditions and other factors that may influence value.
Cade Appraisals Inc. provides professional financing and refinancing appraisal services for homeowners, investors, mortgage professionals, lenders and other authorized clients.
What Is a Financing Appraisal?
A financing appraisal is a professional valuation of real estate prepared for a mortgage or other financing-related purpose.
When financing is secured by real property, the lender may require an independent appraisal to better understand the market value of the property being used as security.
The appraisal provides an independent opinion of value based on market evidence rather than the amount the owner paid for the property, the amount invested in renovations or the amount of financing being requested.
Financing appraisals may be required when:
Purchasing a property
Obtaining a new mortgage
Refinancing an existing mortgage
Accessing home equity
Arranging private financing
Financing an investment property
Obtaining commercial financing
Financing a rural or unique property
Financing new construction or major renovations
The exact appraisal requirements depend on the lender and the particular financing assignment.
What Is a Refinancing Appraisal?
A refinancing appraisal determines the market value of a property when an owner is seeking to replace, restructure or increase existing financing.
Your property's current market value may be different from what you originally paid for it.
The property may have appreciated or declined in value, renovations may have been completed, the surrounding neighbourhood may have changed, or overall real estate market conditions may be different.
A refinancing appraisal considers the property as of the appraisal's effective date and analyzes current market evidence to develop an independent opinion of market value.
Why Do Lenders Require Real Estate Appraisals?
A property's market value can be an important consideration in real estate lending.
The appraisal gives the lender independent information about the property and its value as part of the lender's overall underwriting process.
An appraisal may consider:
Property location
Neighbourhood characteristics
Site size and utility
Building size and design
Age and condition
Quality of construction
Renovations and improvements
Bedrooms and bathrooms
Basement finish
Garage and parking
Outbuildings
Zoning and land use
Relevant comparable sales
Current real estate market conditions
Other property-specific factors
The lender ultimately determines its own financing requirements, lending criteria and loan amount.
What Happens During a Financing or Refinancing Appraisal?
The appraisal process depends on the property and the requirements of the assignment.
For many residential assignments, the appraiser will inspect the property and gather information about its physical characteristics.
The appraiser may review the home's layout, size, condition, quality, improvements, basement, garage, site and other features relevant to value.
The property is then researched within the context of its local real estate market.
Relevant comparable sales are analyzed, with consideration given to important differences between the comparable properties and the subject property.
The result is a professional opinion of market value supported by market evidence.
Does Renovating My Home Increase Its Appraised Value?
Renovations can influence market value, but renovation costs do not necessarily translate dollar-for-dollar into increased property value.
For example, spending $75,000 renovating a kitchen does not automatically mean the property is worth $75,000 more.
An appraiser considers how buyers in the market react to the improvements and how the
renovated property compares with other relevant properties.
Improvements that may influence buyer appeal include updated kitchens and bathrooms, finished basements, additions, garages, outdoor improvements and overall property condition.
The contribution of any improvement depends on the property and its market.
Refinancing After Major Renovations
Homeowners sometimes seek refinancing after completing substantial improvements to their property. This may include:
Kitchen renovations
Bathroom renovations
Basement finishing
Home additions
Major interior renovations
Exterior improvements
New garages
Structural improvements
Extensive property upgrades
The appraisal considers the property in its current condition and analyzes how the market
recognizes those improvements.
Keeping documentation regarding major renovations can also be helpful when discussing the property with your appraiser.
Financing Appraisals for Investment Properties
Financing isn't limited to owner-occupied homes.
Investment property owners may also require professional appraisal services when purchasing or refinancing real estate.
Depending on the property and assignment, the appraisal may consider both comparable market transactions and the property's income-producing characteristics.
Investment properties can include:
Rental homes
Duplexes
Triplexes
Multi-residential properties
Mixed-use properties
Commercial properties
Other income-producing real estate
The appropriate valuation methodology depends on the nature of the property and the appraisal assignment.
Financing Appraisals for Commercial Properties
Commercial financing assignments can require more detailed analysis than conventional residential appraisals.
Depending on the property, valuation may involve consideration of rental income, operating expenses, leases, capitalization rates, comparable sales and other market evidence.
Commercial financing appraisals may involve:
Retail properties
Office properties
Industrial properties
Mixed-use buildings
Investment properties
Development properties
Other commercial real estate
Financing Appraisals for Rural & Unique Properties
Some properties don't fit neatly into a conventional residential appraisal.
Rural homes, farms, waterfront properties, large acreage parcels and unique residences can require additional market research because there may be fewer directly comparable sales.
The appraisal may need to consider characteristics such as:
Acreage
Outbuildings
Private well and septic systems
Waterfront
Environmental influences
Agricultural characteristics
Zoning
Site utility
Location
Highest and best use
An experienced appraiser can identify the factors most relevant to the property's market value.
Construction Financing & Properties Under Renovation
Financing may also be required while a property is being constructed or undergoing major renovations.
Depending on the lender's requirements and the assignment, the appraisal may involve consideration of the property's value in its current condition and/or its anticipated value upon completion.
Construction-related assignments may also involve progress inspections to document the stage of construction completed at a particular point in time.
Because construction financing requirements can vary considerably between lenders, the scope of the appraisal should be confirmed before the assignment begins.
Who Orders the Appraisal?
This is an important question.
For mortgage financing purposes, the lender or mortgage professional may have specific requirements regarding who can complete the appraisal and how it must be ordered.
Before independently ordering an appraisal for financing purposes, confirm the lender's requirements.
This can help prevent a situation where you pay for an appraisal that the intended lender cannot accept.
Preparing for a Refinancing Appraisal
You generally don't need to undertake major renovations simply because an appraisal has been requested.
However, having relevant information available can help the appraiser understand the property.
Useful information may include:
Details of recent renovations
Approximate renovation dates
Building permits, where applicable
Surveys or plans
Information regarding additions
Rental or lease information for income-producing properties
Information about unique property features
Most importantly, provide accurate information and allow the appraiser reasonable access to the areas of the property required for the assignment.
Frequently Asked Questions About Financing & Refinancing Appraisals
Do I need an appraisal to refinance my mortgage?
That depends on your lender and financing circumstances. A lender may require an appraisal to establish the property's market value as part of its underwriting process.
Can I order the appraisal myself?
Possibly, but you should check with your lender or mortgage professional first. Some lenders have specific appraisal-ordering and appraiser-approval requirements.
Will renovations increase my refinancing appraisal?
Renovations may influence market value, but the contribution of an improvement depends on how the market recognizes it. Renovation cost and market value are not necessarily the same.
Should I clean my house before the appraisal?
Normal cleaning and organization can make the inspection easier, but an appraisal is not a housekeeping inspection. The appraiser is primarily concerned with characteristics relevant to the property's market value.
Can you appraise investment properties for financing?
Yes, depending on the property and assignment requirements. Investment property valuations may require additional analysis of rental and income information.
Can commercial properties be appraised for financing?
Yes. Commercial real estate appraisal assignments may involve additional valuation methods and analysis depending on the property.
Can you appraise a property that is still under construction?
Construction and renovation properties can be appraised, subject to the assignment requirements. The appraisal may involve an “as is” value, an “as if complete” value, or other construction-related analysis depending on the lender's needs.
Independent Financing & Refinancing Appraisal Services
Whether you're purchasing, refinancing, accessing equity or arranging financing for an investment or commercial property, an independent real estate appraisal can provide a well-supported opinion of market value.
Cade Appraisals Inc. provides professional financing and refinancing appraisal services with careful attention to the property, relevant market evidence and the requirements of the assignment.
If your lender, mortgage broker or financial professional has requested an appraisal, contact us to discuss the property and appraisal requirements.
Need a Financing or Refinancing Appraisal?
Contact Cade Appraisals Inc. to discuss your property and financing appraisal requirements.