Kevin Slemko AACI of Midtown Appraisal Group

(Outside of a sale or purchase)

Anyone who’s ever bought a piece of property – especially a residential home – involving a mortgage is probably familiar with the appraisal requirement: Very few banks or mortgage financing companies will lend money for home purchase without ensuring that a professional appraisal has been done. They need to know that their investment is reasonable and protected.

However, there are several other situations in which appraisals make sense – and can spare you from a whole lot of time, cost and headache in the long run. Here are our top 5.

1 At the outset of co-habitation. Many Canadians don’t realize that when co-habiting (but not married) couples split up, there is no provision for equitable division of property the way there is when a marriage is dissolved. If one or both members of a couple owns property when they enter a co-habiting situation, it can make sense to document that property ownership by getting professional appraisals done.

2 In the event of a marriage breakdown. For many couples, getting divorced means either selling the family home or one spouse buying the other out. Because a home is often the family’s largest asset, it can quickly become contentious when one spouse wants to accept an offer that the other spouse thinks is “too low” or one spouse insists that their “buyout” amount should be higher. A professional appraisal can put an end to this (and yes, some family lawyers will recommend that each member of the couple get their own appraisals done, with the final value being some average of the two, since that can eliminate the “Your appraiser is on your side” debate.)

3 When a family cottage changes hands. Whether Mom and Dad are selling the cottage to one of their kids, transferring it to all their kids to share equally, or selling it to a third party in order to use the proceeds in their retirement, there are always a lot of emotions involved – and that can lead to the kind of family fights that last for decades. Getting a proper appraisal done by a neutral third party (going through a lawyer can also be helpful in this case) helps to keep the “that’s not fair” comments to a minimum – and may in fact help the whole family end up with more money in their pockets.

4 When a family business passes to the next generation. Successful small family businesses are often successful because the whole family has been involved in it over the years – Mom does the books, Jimmy and Janey worked the cash on weekends, cousin Bob ran the kitchen, etc. But when Mom and Dad want to retire, it may be that only Janey wants to continue the business, while Jimmy and Bob pursue other careers. Getting a professional commercial appraisal of the business can provide an unbiased, thorough analysis of the business that can help the whole family determine what financial arrangements make sense when Janey takes over. And as with the family cottage, that can make a huge difference to family harmony over the long term.

5 When you’re considering major renovations. Most appraisers will tell you: When you’ve lived in your property for 15+ years, it can be hard to have a sense of its worth on the open market. So when you start thinking about doing major renovations, it can be hard to know whether spending $75,000 on a new kitchen is a smart long-term investment or the kind of expense that will never pay off. An appraisal can help ensure that your renovation spend is appropriate, and an appraiser can help you understand what your home might be worth, post-renovation.

It can’t hurt to ask.

If you’ve never been through the process before, you might think that professional appraisals are very expensive, but they aren’t – and generally cost in the hundreds of dollars for residential and cottage appraisals. More importantly, they can mean huge savings on legal costs and increased market values, not to mention the (priceless) peace of mind.

Want to know more about appraisals? Get in touch.