1. Consider its location
In real estate, location is key! Even if a property can be made larger, renovated or transformed, it can never change its neighbourhood, city or street. If a couple is looking for a home in Laval, they will undoubtedly compromise on certain attributes rather than buying their “perfect house” in Brossard. Thus, location is a key factor that influences the value of a residence.
According to recent statistics, the average value of a single-family home in Montreal is $307,250 while in neighbouring Ottawa it climbs to $447,561. In Toronto, the average price ascends to a staggering $1,283,981. However, even a dozen kilometres can influence the price of a home by tens of thousands of dollars. A bungalow in the suburbs could be offered for half the price as the exact same property only fifteen minutes away in the city.
Apart from the city or neighbourhood, you must also consider what is around your house. A property situated in front of a park will have a higher market value than a house located on the same street, but whose yard faces the parking lot of a gas station.
2. Make a list of characteristics that influence the value of your property
Once the location is identified, you must determine what type of real estate property you have on your hands. A two-bedroom home will not have the same value as a four-bedroom home.
Before efficiently estimating the optimal market value, the property’s characteristics must be considered: the living space, land size, number of rooms, presence of a garage and any other unique features, like a wine cellar or a pool. The quality of the exterior (roof, brick, windows, foundation) and the interior finish—particularly the kitchen and bathrooms—must also be examined in detail. The current state of a house carries a lot of weight in its valuation, since the buyer will not hesitate to factor the cost of renovations into his budget. Not to mention all the other potential buyers who will ignore any home that’s not a turnkey property.
When taking inventory of the house’s characteristics, the owner must remain neutral and detached. The emotional value attached to certain attributes of the home must never be taken into account. Do you have wonderful memories of your outdoor pool—even if it’s a little dated—where your children learned to swim? The next buyer will simply find that the pool needs to be replaced…
3. Examine comparable properties
As in any market, real estate is influenced by supply and demand. If a certain type of property is popular, its value will be adjusted higher and more significantly because this type of offer is rare. For example, putting a two-bedroom condo up for sale in the Plateau-Mont-Royal at the same time a dozen of your neighbours have the same idea can complicate the deal… unless your home is positioned more favourably than the other similar properties. Therefore, assessing properties in your area with similar characteristics is important.
The first question to ask: At what price did the last transactions of comparable properties close? By “last,” we generally mean properties sold within the last six months. However, the time spent on the market is variable across the country. While a single-family home in Montreal takes an average of 88 days to sell, a property in Toronto will spend an average of 15 days on the market.
To establish a representative price range, you should identify between three and ten recent comparable properties; then all you have to do is position your property within that range. Does its location in front of a primary school help the property stand out favourably, or does its proximity to a high-traffic street put it at a disadvantage to the other properties?
When it comes to setting a selling price, consider your personal situation. If you need to sell quickly to respect the clauses of a conditional purchase offer on another property, you may have to be willing to accept a lower offer. However, if your sell date is not pressing, be patient so you can get the offer you want. In real estate, time is money!
4. Work with a real estate professional
A real estate agent can assist a seller in evaluating the market value of his property. Sellers can depend on the agent’s knowledge of the market, a study of comparable properties and the agent’s experience to direct the seller to the right price for your home.
As for the chartered appraiser, he’s earned his job title. He is equipped to form an objective opinion on the value of a property. Supported by a professional order, the chartered appraiser follows a rigorous process in compliance with a strict code of ethics and an additional guarantee of quality. The chartered appraiser makes a physical visit to the premises before carrying out a study of the neighbourhood and market before making his recommendations.
The local government creates an inventory of all the buildings in its territory to set the amount of municipal and school taxes for properties. You could consider that the valuation is fair because the government takes into account the property’s real value in the market where it is located. However, you could find the municipal government’s valuation outdated since it does not consider the state of the current market. This is not efficient for setting the market value of your property today.
Could you at least trust that the city has filed for a new round of property assessments? Short answer: no. This new recorded value depends on an assessment conducted a year and a half earlier… An eternity in the real estate market!
At the very least, municipal valuation can help in the assessment of comparable properties. At what percentage, above or below the property valuation, were neighbouring properties sold? If the transactions closed at less than 30% of their municipal valuation, it would be surprising if you could sell at a higher price.
Evaluating the market value of a property can also be relevant if you want to prioritize future renovations, obtain additional financing, better assess the overall value of your asset portfolio… or avoid any unpleasant surprises before receiving your next tax statement!