Important Real Estate Facts You Should Know

• All property in Canada is owned by the Crown. Legally, the government grants a form of ownership known as fee simple through a Land Title system. Various restrictions to ownership, such as mineral rights or easements, etc, may be registered on the title of a property and may affect value.
• Most appraisals estimate market value. Market value is defined as "the most probable price, which a property should bring in a competitive and open market under all conditions requisite to a fair sale...."
• There are three traditional approaches to estimating market value.
  
  • 1. The cost approach involves adding the land value to the depreciated improvement costs,
  • 2. The direct comparison approach involves comparing the property under appraisal to others with similar characteristics that have sold recently,
  • 3. The income approach applies to income earning properties, utilizing market based capitalization rates.
• The cost and direct comparison approaches are typically used for residential properties, but the direct comparison approach is normally given prominence. Some lenders no longer require a cost approach, but this appraiser believes the cost approach is an important reality check and its use can help quantify bubbles in the real estate market.