Many aspects of
the homebuying process changed drastically due to the COVID-19 pandemic, but
few have relied on such creative solutions as those employed for home appraisals.
In the early days
of the pandemic, during the full lockdown, appraisers were prohibited from
entering homes to do their jobs.
It was a major
obstacle for an industry whose members rely so much on their senses to determine
the true value of a property. A musty smell, for example, can lead an appraiser
to poke around a little to potentially uncover a mould problem.
But the industry
employed creative workarounds to keep conducting appraisals which, in some
cases, are required by lenders before they can grant mortgage approvals (but
not always).
Even when a
formal appraisal isn’t ordered, there are a number of "behind-the-scene”
assessments that take place to ensure a property is valued fairly. When a
lender agrees to finance a purchase, you better believe they’re going to do
some due diligence to ensure the home is worth the loan they’re about to grant.
That kind of
assessment is typically done using the Automated Valuation Model (AVM). This involves
computer programs that provide an analysis of real estate markets and estimated
values by relying on public records, including municipal assessment data.
Substitutes
for Physical Appraisals
For situations
where an appraiser is required to do a physical assessment, or "full
appraisal,” that’s where things got tricky.
But lenders were
quick to relax their policies—within reason—to facilitate new forms of
appraisals.
Early on, two
lenders, MCAP and RMG, for example, approved modified full appraisals by
allowing appraisers to rely on virtual inspections completed by the customer by
various means.
Merix Financial
President Boris Bozic said earlier in the year that they too "fully embraced
the ‘peekaboo’ approach to assessments.”
That approach included
everything from appraisers peeking through windows to see the interior of a
home, to equipping homeowners with cameras, who were then able to provide
appraisers with a guided virtual tour of the home.
Where Things
Stand Today
The Appraisal
Institute of Canada is still recommending limited interpersonal contact for its
5,000+ members for the "foreseeable future.”
However, since
the lockdown ended, appraisers have had the option of going back inside homes
to conduct their full appraisals as long as they follow public health
guidelines, including social distancing and mask wearing.
"I’ve
been pleased with how we’ve been able to help our members adapt and support
them throughout the process,” AIC President Keith Lancastle told the Canadian
Real Estate Association recently. "If we would not have had the ability to
adapt, things would have been remarkably different.”
If you are
thinking about entering the housing market, a TMG mortgage broker can help you
understand your financing options, and further explain the appraisal process.