MortgageBroker mbabc.ca winter 2015 | 35
Reality: e return on investment
depends on the added value of the renovations,
the quality of the renovations, and the neighbour-
hood market conditions. Unique designs
or improvements that are uncommon for a
particular market may even adversely impact the
selling price of a home; therefore, the full return
on the investment will likely not be obtained.
Obtaining an expert opinion of value
from an appraiser will provide an objective
perspective on the marketability of the property.
Since real estate values have escalated over
the past decade, the return on renovations
in terms of return of renovated costs have
reduced as land values have escalated.
Myth: Not much has changed
in the real estate appraisal
industry over the last decade.
Reality: e mortgage lending industry
has changed significantly and has become highly
competitive and complex. Homebuyers can now
choose from a wide range of mortgage product
offerings from traditional lenders, small niche
players, credit unions, insurance companies,
private lenders and other sources. e highly
competitive nature of the market increases the
industry's need to seek out costs savings and
efficiencies at every stage of the process.
Another outcome of this competitive
market trend is the outsourcing of a large
portion of the appraisal activity to Appraisal
Management Companies (
AMCs) beginning
in the early 2000s.
AMCs compete to secure
business from lending institutions through
service level agreements that include
performance standards such as defined
turnaround times, appraisal fees, appraisal
management costs, data extraction and
analysis and reporting.
While this business model is not
expected to change, this trend may continue
to lead to the commoditization of the
residential appraisal function. In some
countries, the best and brightest appraisers
are seeking opportunities outside of
residential appraisals for mortgage financing
purposes which has led to skills shortages
for this type of appraisal work. Turn-around
times are then affected as well as the pricing
of residential appraisals for the clients. is
will be an interesting trend to monitor in
the future as it has the potential to affect the
whole real estate industry.
•
Janice O'Brien is the executive director of the
Appraisal Institute of Canada.
residentialappraisals
