February 21st - 2014

Estimating the value of a heritage property

Valuing a heritage home requires certain specialized skills.

Dealing with heritage properties

Dealing with heritage propertiesValuing a heritage home requires certain specialized skills. Although heritage properties have been around for years, the process of estimating their worth has changed. This is due to a shift in attitudes about owning an older home as well as changes to the Ontario Heritage Act.

Some 40,000 to 50,000 designated heritage properties can be found across the province and that number is constantly rising. Chances are that most real estate brokers and salespeople will encounter this type of property over the course of their careers. Here is a three-step guide for REALTORS® interested in learning more about how to value a heritage property. Those three steps can be summarized as: compare, modernize and “attributize” – a word I have created to describe the third step.

Compare - It might surprise you that this process starts by comparing the heritage home with other, possibly dissimilar, existing homes in the area. Almost all valuations for market value begin this way. Neighbourhood desirability is reflected in existing land value and property prices. Therefore, the first step in estimating the value of a heritage property is to compare it to other properties in the area. We look at house size, the number of rooms, finishes and amenities. When we deal with a heritage home, consideration of its age or condition is not yet a factor.

Modernize - The second step involves deducting the cost of bringing the heritage home in compliance with current building standards and making it comparable with the amenities found in surrounding homes. In other words, we conclude what, if anything, would have to be done to bring the heritage home up to the standards expected in the area. A good knowledge of construction methods used some hundred years ago and how they may be updated to meet current standards, as well as being ‘au courant’ with the cost of carrying out these repairs or improvements, is a definite asset.

Attributize - Finally, the valuator must consider the distinctive features of the property that caused it to be designated a heritage property or to form part of a Heritage Conservation District in the first place. The market value of these factors is then added to the comparable value of the property, less the cost of bringing it up to code and local market acceptance. This is where the difference in value between a normal home and a heritage home takes place.

According to the act, heritage attributes fall into three categories; design, historical and contextual. If the attributes pertain to design, such as cornices, moulded fascia, leaded windows, etc., then an in-depth knowledge of their replacement cost is absolutely necessary. This is why heritage appraisers are often seen poking around in architectural salvage shops. They must also keep in contact with tradespeople who are experts in repairing and replacing damaged or deteriorating items of heritage interest.

Familiarity with the level of acceptance of certain features on the open market is just as important. In this respect, much can be gained by attending open houses and talking with listing agents. It's a good way to understand what buyers are willing to pay for these items. The rule of the market is always the final arbitrator, since nothing is worth more than what someone is willing to pay for it.

On rarer occasions, when the attributes are of museum quality and have historical or contextual value, it is more difficult to value a heritage property. In that case, one would probably want to consult with local museums or historians. Often these properties have a limited market appeal and are purchased mostly by civic bodies or institutions, and in some cases depending on their significance, by the Ontario Heritage Trust.

Robert Hulley, writer on heritage issuesEven though this process has been described in three steps, the goal is always to establish the property’s worth in its entirety, including the very essence of the building and in some cases its setting. The whole is always worth more than the sum of its parts and the way in which the parts are integrated into the property’s ambiance is also reflected in the value. In the final analysis it's all part of the process.

The late George L. Schmutz, esteemed author and one of the earliest experts on property appraisal, describes the appraisal process as “simply an orderly procedure in making value estimates.”

For more information on determining cultural heritage value under the Ontario Heritage Act, visit Ontario Heritage Tool Kit. For more information on Heritage Conservation Districts, visit Conserving Ontario's Heritage Places.

Robert Hulley is a retired Toronto REALTOR® and accredited property appraiser. He is the former chief appraiser at the Appraisal Institute of Canada and a frequent contributor on heritage issues.  

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