While the definition of rural and remote varies from lender to lender, generally speaking, any property with a postal code that has a “0” as the second digit is considered rural or remote. What differentiates the two is their distance from an urban centre. Most will agree that "remote" properties are more than 50km away from an urban centre, and rural ones fall within the 50 km radius.
So what makes rural and remote property appraisal reports different than those completed in Urban centres, and why do they often cost more than more expensive homes in big cities?
Proximity
Since the property appraiser inspects the property in most cases, there is typically a mileage charge associated with rural and remote property appraisals. The further they must travel, to more likely it is that there will also be charges for accommodations. People in urban centres often forget that North America has little cities dotting the landscape, some of which are hundreds of kilometres from urban centres. It isn’t abnormal for float planes to be used to get appraisers to remote areas to appraise properties.
Lack of Data
Rural and remote properties tend to trade less frequently than urban centre properties. The properties themselves are often fairly different from one another, making it harder for appraisers to find good data (comparable sales data) for their analysis. The result is the need for a more in-depth historical search. Appraisers will tell you, from experience, it is generally harder to appraise a property that’s 20km out of the city than one in a newer subdivision.
Timing
Although proximity was already mentioned, it is good to note that it generally takes longer to get an appraisal rural or remote appraisal report in direct relation to the distance that property is from an urban centre. This isn’t to say that reports are only generated by appraisers in urban centres. It’s just normal that the additional travel and greater difficulty in getting good data translates into longer turn-around times.
Appraisal Management Companies Aren’t Built for Rural & Remote
Appraisal management companies (AMCs), in general, provide many benefits to their lender clients. One of the things I hear lenders gush over is that they get a “set fee” for any property with an estimated value under “$1.5 million,” or some other figure. … and then they need a report on a $700,000 home in a small town and they learn that, despite their agreement, that no appraiser will do the job for the amount the AMC wants to pay. This creates and even longer turn-around time for the report because the AMC is left dialing for dollars, hoping to find an appraiser who will A) do the job as cheaply as possible, and B) agree to do it close to the original requested time-frame. One price “fits all” doesn’t work in the appraisal business except in large centres, and even then it doesn't work perfectly. Rural & remote should never be included in a fixed pricing scheme.
The above gives you a quick understanding of some of the main differences between rural and remote appraisal reports when compared to urban property appraisals. And while there are more differences, these are the reasons why they cost more and take longer to complete.
Value Connect specializes in tough appraisal reports, including those in rural and remote areas. Contact us if you need a report and to learn how we do things differently.