Igot an email from a homeowner who was upset - that's nothing new. But she wasn't upset because a contractor screwed her over, or because she got a bad home inspection. She was mad because of an appraiser.
She and her husband wanted to redo their kitchen. They had bad plumbing, bad layout, bad tiling, improper ventilation. And it looked ugly.
The new homeowners wanted it fixed. So they did what many homeowners do - they went to their bank for a home equity loan. But they ran into a problem.
The appraiser the bank hired decided their home's value couldn't support the loan. So they couldn't refinance their mortgage, which meant they couldn't redo their kitchen.
Was the appraiser wrong? Was their home that bad? I don't know. I haven't seen the house. But the homeowners didn't think so.
That's why they emailed me. They thought the appraiser didn't have the right skills to evaluate their home. And I've got to wonder.
The appraisal industry works a lot like the home inspections industry. There isn't a single set of standards. The skills you need to be an appraiser depends on the association an appraiser belongs to.
Some associations require a university degree as a first step. Others a business degree. And some don't require a degree at all. But most appraisal associations want some kind of designation. And again, that designation will be different for every association.
For example, one association requires its members to have a university degree - in anything. Could be sociology or art, it doesn't matter. Then they have to complete a university-level education program specific to appraising.
Most of the courses in the program deal with real estate and business. But what about building skills? Understanding the structure of a house? A basic understanding of construction? Aren't these skills important when you're evaluating a home? For some appraisal associations it is. But not always.
When it comes to mortgages, banks care about a home's selling price. Why? Because if a homeowner can't pay his mortgage, the bank will have to sell their house.
Banks want their money back. They want to know how much they can sell a house for. And sometimes a home's construction has very little to do with that.
You could have a house that cost $2 million to build. But an appraiser says it's worth $600,000. Is this fair? Where was it built? Maybe the neighbourhood's no good. In this case the appraiser is saying that the only way to sell the house is if it's priced at $600,000.
Then you've got a market like Vancouver or Toronto. You can't buy a house downtown for less than $1 million. It doesn't matter if it's a shack. It's all about land value.
More banks are starting to put pressure on appraisers. They want to make sure that if an appraiser says a property is worth $500,000, they can sell it for $500,000.
But if an appraiser's job is to know how much a house is worth, that appraiser should know about construction. That's basic.
I've heard of homeowners having to point things out to an appraiser; things like radiant infloor heating, Low-E windows, a metal roof - even a finished basement. Or some appraisers will ignore mould, faulty electrical and heating or venting. These have a huge impact on the value of a home.
Having a basic understanding of a home's structure, materials and mechanics is logical. It's essential. How do you value something you don't understand?
Are business skills important for appraisals? Absolutely. But so are building skills. You need to know the signs that tell you what a house is worth. Believe me - a fresh coat of paint can hide a lot of trouble. And it can be really difficult for someone who isn't trained to look for the signs.
We have good contractors and bad contractors. Good home inspectors and bad home inspectors. And good appraisers and bad appraisers. The good ones have strong associations backing them up. And the bad ones are bad because the industry allows it - we allow it.
If we want to change the industry, we all have to be watchdogs. If you think an appraiser is wrong, tell them. Speak to their association. You might need to point things out. They might listen. And you might help make it right.
Catch Mike Holmes in his new series, Best of Holmes on Homes, Tuesdays at 9 p.m. on HGTV. For more information, visit hgtv.ca. For more information on home renovations, visit makeitright.ca.
