You’ve found the right home, your offer has been accepted, the
inspection went well, and things are moving along smoothly. Then, your
broker lets you know that the bank will be sending someone to evaluate
the property.
At this point, you might be wondering:
Why is the bank doing this?
Will it affect my mortgage?
Is there anything to be concerned about?
The good news is that bank evaluations are a normal part of the
process and nothing to worry about. Here’s what you need to know.
What is a bank evaluation and why does it happen?
A bank evaluation is when your lender sends a certified appraiser to
the property you’re buying. This is simply to confirm that the home is
worth what you agreed to pay. It helps the bank make sure they’re
lending responsibly.
Evaluations usually happen for two reasons:
1. The agreed sale price is higher than recent comparable sales in the area.
2. You’re putting a down payment of 20% or more. When you put less
than 20% down, your mortgage is insured through CMHC or Sagen. But
with 20% or more, there’s no mortgage insurance, which means the bank
is taking on more risk and wants to double-check the property’s value.
Should you be concerned?
Generally, no. Unless you’re buying the home for significantly more
than others in the area (about 25% higher or more), or the home is in
poor condition, there’s usually nothing to worry about. Evaluations
are very common and straightforward.
What happens during a bank evaluation?
It’s a short and simple process.
– The visit is usually scheduled 24 to 48 hours in advance.
– The evaluator will spend about 20 to 30 minutes at the property.
– They’ll take some photos, ask a few questions about renovations or
updates, and note general details.
– Their report is sent directly to the bank within 1 to 2 business days.
Buyers and sellers don’t usually receive a copy of the report unless
there’s a specific issue.
Is this the same as a home inspection?
No, they are completely different.
A home inspection is a detailed check of the property’s condition and
can take 2 to 3 hours.
A bank evaluation is focused only on the value of the property and is
based on comparable sales in the area.
Why does the bank care so much?
The bank needs to make sure the property is worth the loan amount. If
the buyer ever defaults on the mortgage, the home is the bank’s
security. Evaluations also help prevent risky lending and potential
fraud.
At the end of the day, evaluations are more common than most buyers
think and are not a negative sign. They are just one more step in the
process to help protect everyone involved.
If you’re planning to buy a home and want to feel confident through
every step of the process, reach out to us at Groupe Baronello. We’re
here to make it simple and stress-free.
