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More and more mortgage agents and brokers have come to the realization that assessing a property’s value (beyond asking their client) at the application stage makes good sense for the client, lender and themselves.

As we all know, Canada has enjoyed a smoking hot real estate market for a several years now. However, this can be tricky when it comes to arranging mortgage financing. In cities like Toronto, bidding wars can drive the purchase price well over what a property’s appraised value might be. In refinancing scenarios, such knowledge (coupled with sentimentality) may result in your clients assuming their home is worth far more than what it would be appraised for.

At the end of the day, lenders are only going to lend on what they believe a property is worth. So how can you assess a property’s value before you submit a deal to be financed?

The two most relied upon ways are through an Automated Valuation Model (AVM) or through reviewing sales comparables.

Automated Valuation Model (AVM) – this is an automated tool that estimates a property’s value based on the analysis of public record data, property location, market conditions and real estate characteristics at a specified date. The AVM will check the location in question, size and other key features and search its database for the best set of comparables or indices to generate a value for the subject property. The accuracy of the AVM depends on where the supplier derives the data. In the example of Purview, some of the data comes from POLARIS (The Province of Ontario Land Registry Information System). This is the most current and accurate source of land data in Ontario. Even lenders use the lender version of Purview which relies on the same source of data.

Comparable Sales – this is a method often used by real estate sales professionals to derive property values. Some real estate sales professionals rely on their local MLS, while others use GeoWarehouse or a combination of both. It is important to consider your lender’s criteria when reviewing comparables like radius and length of sales (homes sold in 60 days, for example).

The first method requires less research than the latter, however some tools like Purview can quickly summarize comparable sales for you. Regardless, however you go about it, pre-assessing property values is well worth it. Not only does it lead to more closed deals, it also enables you to offer an even better service to your client.

To find out more about how to use Purview For Mortgage Brokers to assess property value, please visit today.