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If you’ve considered selling your home or want to assess its current market value, you’ve likely come across the term “Free Home Valuation.” But what exactly is it, and should you trust it? In this blog, we unravel the mystery surrounding home valuations, exploring what they are, why they’re sometimes offered for free, when they can be useful, and whether or not you can trust them.

What’s a Home Valuation?

A Home Valuation, also known as a home evaluation or Comparative Market Analysis (CMA), is a service offered by real estate professionals to determine the approximate value of a property. It involves assessing various factors, including the property’s location, size and condition, and comparing it to similar, recently listed and sold homes in the neighbourhood. The goal is to provide homeowners with an estimate of their home’s worth in the current real estate market.

Related: Determining the Value of a House

Related: Determining the Value of a Condo

Home valuations can be in writing or verbal, formal or informal, very detailed or simply just a dollar range, depending on why you need it and who performs it. 

Why Are Home Valuations Sometimes Offered for Free?

Many real estate agents free home valuations to help them establish relationships with potential clients. They hope that by providing valuable information, they’ll earn your trust and business when you decide to buy or sell a property.

A home valuation is different from a property appraisal, which is performed by a Certified Appraiser. Property appraisals are never free. 

When Should You Get A Free Home Valuation?

Knowing how much your home is worth is beneficial when you’re:

  • Thinking of Selling Your Home: If you’re considering selling, knowing how much your home is worth helps you plan your next move. Getting a home valuation is a great way to meet and assess potential selling agents and discuss your specific situation with professionals. If you don’t decide to sell now, you’ll have shortened the realtor selection process for when you are ready to sell!  Related: Hiring a Listing Agent
  • Buying Before Selling: You can’t really plan the budget for your new home without knowing how much your current home is worth. No real estate agent can guarantee you a price for your house, and it’s important to remember that prices can quickly shift with changing market conditions. Nonetheless, it’s important to know the range of the value of your home – just make sure to budget at the bottom of the range (and lower if market prices are declining).
  • Refinancing: Lenders usually require a full property appraisal when refinancing a mortgage, but a CMA can provide an initial estimate.
  • Curious: Even if you’re not planning to move, you might be curious about your home’s worth, especially in a changing market. Contact the agent who helped you buy your home to help you understand its current value. 

When Should You Pay for a Property Appraisal? 

During a ‘free property valuation’, a REALTOR provides an opinion of value, but it’s not always very detailed or in writing. It’s also subjective and shouldn’t be relied on for important financial or legal matters. That’s what a property appraisal is for.

Property appraisals are performed by professional appraisers. While some REALTORS are also appraisers, most are not.

We always recommend people pay for a professional appraisal in the following circumstances:

  • Pre-nuptial agreements
  • Legal separations and divorces
  • When determining the historical value of an investment property for tax reasons
  • When selling your home to a family member or friend
  • To estimate the value for an estate with multiple heirs

If you’re refinancing your current home, your bank or lender will order a property appraisal in order to estimate value. 

You can search for certified appraisers in Toronto here.

Can Homeowners Trust Free Home Evaluations?

While free home evaluations provide a valuable starting point, homeowners should approach them with caution:

  • Not a Guarantee: A valuation is an estimate, not a guarantee of the final sale price. Only the seller and eventual buyer determine the true market value of a home when they agree to a purchase and sale price. 
  • Market Conditions Change: A home valuation happens on a specific date, and it’s important to know that the value of a home fluctuates with the market. As we’ve seen in the last few years, those market changes – both up and down – can happen quickly.
  • Varying Expertise: The accuracy of a valuation depends on the REALTOR’s experience, expertise and the data used. Seek experienced professionals.
  • Limited Scope: An evaluation might not consider unique situations or factors that could impact a property’s value.
  • No Substitute for Appraisal: If precision is essential, consider a professional appraisal, as it’s a more in-depth assessment.

What Factors Impact Home Value?

Understanding the factors that influence your home’s value can help you interpret home valuations:

  • Location: Proximity to amenities, schools, public transportation, and safety play a significant role.
  • Property Size: The size of your home and lot, including the number of bedrooms and bathrooms, impacts its value.
  • Condition: The state of repair, maintenance, and the type and quality of renovations affect value.
  • Comparable Sales: Recent sales of similar properties in your area provide a benchmark.
  • Market Conditions: Supply and demand, economic factors, and local trends influence your property’s worth.

Related: Determining the Value of a Condo

Related: Determining the Value of a House

Beyond the Home Valuation: Making Informed Decisions

Getting a home evaluation is just the beginning of your real estate journey. To make informed decisions, consider these additional steps:

  • Ask Questions: Don’t hesitate to ask the agent(s) about their methodology and data sources. 
  • Consult Multiple REALTORS: Get multiple evaluations to compare and confirm – look for similarities and differences.
  • Stay Informed: Monitor local real estate trends and market conditions.
  • Consider Appraisal: If precision is important, consider hiring a professional appraiser.
  • Set Realistic Goals: Base your selling or buying strategy on a well-rounded understanding of your property’s worth and market dynamics.

Home valuations are a valuable tool for homeowners, providing insight into how much your home is worth in the current market. While these evaluations are often offered at no cost, it’s important to understand the limitations.

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