Mortgage 101 – Real Estate Appraisals with Derek Bellefontaine

Derek Bellefontaine, Real Estate Appraiser, with Mari Tech joins us as our guest to discuss the role of appraisers in valuing homes, which is crucial for purchasing, refinancing, and separations.

Role of Real Estate Appraisers vs. Realtors

Dan Ahlstrand
Welcome back to Mortgage 101. Dan Ahlstrand along with you. He is Clinton Wilkins, and we’re talking financial literacy this month, because it is Financial Literacy Awareness Month, and we’ve got a special guest in the studio. We’re gonna learn a little bit more about building assets. And we’re very pleased to welcome into the program Derek Bellefontaine, a Real Estate Appraiser with Mari-tech Appraisal & Inspection Ltd. Derek, welcome!

Derek Bellefontaine
Thank you very much for having me!

Clinton Wilkins
Thanks for coming on.

Dan Ahlstrand
I guess the best play to start this for those that don’t know, is, what does a real estate appraiser do?

Derek Bellefontaine
Other than just walk around and look at people’s homes? We essentially, value and interpret data to value homes to be the eyes and ears of the banks and the lenders.

Clinton Wilkins
So when would someone need to get an appraisal?

Derek Bellefontaine
The main times are purchasing, when purchasing a home refinancing. And then what we’re seeing a lot more of these days as a result of COVID, is separation.

Clinton Wilkins
Yeah, I can tell you, there’s certainly a lot more separations going on now than there were. We see people getting divorced and separated every day. I have 20,000 clients, but there weren’t so many the last couple years. I would say, from 2020 probably, until this year, that was slow, but 2024 it’s been rampant. I think people kind of put it on hold. I think one reason is people had to hunker down over COVID, like it or not you had to tough it out. And I think the other reason is it was just a lack of supply of housing, you know, if you’re gonna break up, you need two households.

Derek Bellefontaine
It was that. And I can also say the third reason might have been because the values jumped so high, right? There’s two parties, and one’s looking for the high value, one’s looking for the low the other one of them has to buy out the other one.

Clinton Wilkins
That’s interesting. I never really thought about that. You know, I think the elephant in the room, and people ask me all the time, and they’re like, Okay, why do I need to get an appraisal? I have a realtor, they can just give me a valuation. What is different between a realtor giving them a, value and you giving a value. What is the difference there?

Derek Bellefontaine
Aside from legal, as good as they are at what they do, they are not allowed to actually provide a value. They are allowed to provide a range of value, okay? And sometimes there’s a lot of fantastic realtors out there, but some realtors are looking for a sale, right? So they want to give you a number that they think you want to hear.

Clinton Wilkins
And could be a much above the market value.

Derek Bellefontaine
Usually it is, yeah, because they want to get you on the hook, so to speak. We are bound by our governing body, and we are basically acting on behalf of the bank, and so the bank looks for us to provide that valu.

Dan Ahlstrand
Obviously the market went a little crazy during COVID, and the appraisal values have all gone up. What is it that when you go into a house, you’re looking for? Are you looking for upgrades? Are you looking for? What is it exactly that checks the boxes off?

Derek Bellefontaine
Well, homeowners ask me that frequently, or almost all the time. And my answer is always, I’m essentially looking at your house as if I’m a prospective buyer, and how they would look at it. So the finish, the size, is the house in a good location? Of course, that’s one of the bigger parts. And if everything is fine, there’s no issues, then we basically go by square footage and everything, take everything into consideration. And a lot of people ask, you know, I’ve got some gardening done in the backyard and stuff like that. How much does that impact it? I said, my response is, it all impacts the value. It’s my job to find out how much it impacts the value, right?

Clinton Wilkins
And there’s so many adjustments that happen. You know, obviously I’ve ordered a lot of appraisals in my almost 20 years of doing this, and the adjustments sometimes can be, very small, but sometimes the adjustments can be vast. And oftentimes when I get an appraisal in, there’s 3456, comparables. You know, how does that impact that final value?

Derek Bellefontaine
Every lender has their own parameters. Okay? So some lenders will only like us to go back three months.

Clinton Wilkins
So like, you have a really unique home that could be a challenge.

Derek Bellefontaine
Oh, very Yeah, yeah. So sometimes that’s when we have to add four or five and six, and sometimes up to nine. Wow. Think the most I’ve ever done was nine, yeah, it’s a challenge, and it takes a long time to do it, but that just proves to the reader and the underwriter of that report that they’re more secure in that value that we’re putting on it.

Factors Influencing Appraisal Values

Dan Ahlstrand
What impacts the appraisal value more? Is it the curb appeal? Is it the outside stuff, or is it the new finishings, the new new drywall, new paint, new carpets?

Derek Bellefontaine
It’s a little bit of both, because as soon as we drive up to a property, I mean, curb appeal is exactly what it is. It’s curb appeal. So you get a good or a positive or a negative feel as soon as you drive up to it. Then you go inside, and if based on the outside you get a negative feeling to it, and you go inside and it’s all totally renovated. Then you know, your feeling could change, right? Or you could still be like, Well, I still don’t like the outside of it. The inside is great, but the outside looks like crap.

Clinton Wilkins
And I’ve watched so many real estate shows, on all kinds of streaming platforms all the time. If buyers and borrowers out there are looking to just do one thing that’s going to increase their property value now, like, maybe they’re buying the property and their intention is to do a refinance, and they’re going to do one thing to increase the property value. What would you say? Like the number one thing that borrowers should do?

Derek Bellefontaine
The number one thing always has been kitchen, kitchen and bathrooms. Okay, want to renovate those. But the close number two now is doing secondary suites, right? That’s a huge thing in Halifax. I’ve never seen so many in my life, and people are either putting basement units in or converting garages to secondary suites, or even building secondary suites in the backyard, right?

Clinton Wilkins
Like a lane way. And we’re gonna talk about more of that later in the show, it’s been a really, really hot topic. I expect we’re going to see many more of these secondary suites come here in the new year. Obviously, you’ve heard of some changes that have been announced by the federal government that it’s going to make financing of some of these secondary suites, I think, easier overall. Yeah. But our municipality here in Halifax, they’ve really kind of opened the door to more of these secondary suites in terms of bylaws. I remember, you know, 15 plus years ago, it was really hard to even get mortgage financing or use any of that income. But now this Nanny suite/in- law, suite is certainly a lot more palatable, I think, hopefully, from a real estate appraisal perspective, but also from a lender perspective as well.

Derek Bellefontaine
In terms of getting financed, absolutely it seems like the rules are changing every day. Like you said years ago, there had to be two separate power services or heating services and stuff like that. Now it’s all kind of amalgamated.

Clinton Wilkins
That’s really good to know.

Neighborhood Impact on Appraisal Values

Dan Ahlstrand
Derek. We talk about, appraisals and neighborhoods and location being location being location, how much does the neighborhood that you’re in affect the appraisal of a home? And by that question I’m asking, if you’re living in an upscale neighborhood, and maybe there’s a couple of more rundown houses in the area, or maybe there’s, you know, some kind of empty lot, or something along those lines. I hear about things all the time that people say, well, that’s going to affect my property’s value. Having this there. Do you see that in your in your practice?

Derek Bellefontaine
We do. We see it. It seems to be more of a concern of homeowners, rather than home purchasers, because especially where the the supply is so limited now, people are more willing to, kind of deal with that and accept it. They’ll, take properties in a more rundown area or with rundown properties around it, because there’s really just nothing else.

Clinton Wilkins
Well that can be a great way to build net worth in terms of building an asset. Sometimes buying the worst home in the best area can be a great solution, especially if you’re planning on improving it. We’re seeing more and more of that, really every day. Yeah, do you ever come across a situation where people are just not happy with that appraisal value. I think everybody thinks their stuff is worth more than it’s actually worth. Like, tell me, how do you handle that? How does that impact your work? Because obviously you’re receiving the calls.

Derek Bellefontaine
Yes, I received the calls, but I’ve never had anybody unhappy with my the value.

Clinton Wilkins
Okay? I thought you just explained it away to them, and they’re like, Okay, I got what you’re saying.

Derek Bellefontaine
No, we do, and especially when the values jumped up so much. Of course, in 2021 and 2022 a lot of people are still thinking that the values are increasing at that increment. They’re not.

Clinton Wilkins
What are we thinking? Like, one, two, 3% like, more to where we were, like, pre pre pandemic?

Derek Bellefontaine
Yes, more balanced. But there’s still lots of people that are not happy with their value, because they’ve got a vested interest in it, right? And they think it’s worth X amount of dollars, and sometimes they just dig their heels in and say, “you’re absolutely wrong.”

Clinton Wilkins
Well, where I see this is probably very similar to in Real Estate. When you see these listings and they’re just completely out of touch, probably, you know, they think this is what the value should be. But you know, what we see from an appraisal perspective, it really should be representative on what people could sell their home for, yeah.

Derek Bellefontaine
And sometimes the realtors have their hands tied with the homeowners just really wanting that value for sure.

Dan Ahlstrand
Derek, appreciate it. Great information. We’re going to stop take another break. You’re listening to Mortgage 101, Clinton and me, Dan are back in a minute. Yeah.