What is Real Estate Appraisal?

Real estate appraisal, also referred to as property valuation, is the process of determining the worth or market price of a property. It’s possible that you lack the time or the desire to thoroughly investigate every factor in order to determine a price, or that you have already decided on a price but still want a professional opinion. In any instance, it will be advantageous for you to have a Real estate appraisal done so that you can be certain that the price you have set for your property is the right one.

Let’s quickly review the two primary techniques utilized in real estate appraisal:

• Fair Market Value (FMV) Technique
• L and B method: Land and Building

1. Fair Market Value (FMV) Technique
2. L and B method: Land and Building
3. How Home Valuations Operate

• Who pays for the value of the property?
• How can a real estate appraisal impact your request for a home loan?
• How does a real estate appraisal benefit prospective homeowners?
• What happens if you don't like the property’s appraised value?

Due to its simplicity, the FMV approach is the most widely utilized valuation method for ready-to-move homes. The costs of comparable properties are noted under this. These comparable homes must be close, recently listed (within one to three months), and have similar square footage (sq ft) and layouts (BHK).

The premium elements connected to your property must then be determined. Consider the Preferential Position Charges (PLCs), which range from Rs 50 to Rs 150 per sq ft and are charged to purchase a unit with a superior location (such as park-facing or on a preferred floor, among others) within the same apartment complex.

Other aspects to take into account are facilities (does your property provide access to a swimming pool or an internal park in the housing society?) and luxury specifications (luxurious flooring and kitchen remodeling). You can determine your property’s fair market value by adding these up.

The more complex Land and Building (L and B) technique is typically applied to newly constructed or under-construction properties. Professional real estate appraisals frequently utilize this procedure to determine the worth of properties that are ready to move into.

During the appraisal process, the legal aspects are also looked at, which includes looking at the documents used to identify the property, such as the title deed and the mutation certificate.

Depending on the type of property, some real estate appraisal charge a fixed fee of between Rs 10,000 and 20,000 for their services, while others charge between 0.1 and 0.3 percent of the entire property value (apartment, or villa). Even though the costs may build up, it is useful because you will receive expert price guidance, which is important for the selling process.

Technical and legal experts are dispatched by the bank to physically inspect the property and create an appraisal report based on a number of variables, such as:

• Size
• Age
• Map
• Location
• Structural issues and status
• Construction quality
• Level of degradation
• Title to property
• Information about the neighborhood
• market trends
• Present value
• Costs of nearby, comparable properties
• The cost of improvements and their anticipated depreciation periods
• Rental costs
• Predictable costs of comparable homes

Although the general cleanliness of the property is a terrific way to exhibit your home, keep in mind that it will not directly affect the home’s value. When the appraiser assigns a value to the property, how the property has been cared for throughout the years will undoubtedly have an impact on its structure.

Banks use reputable, independent appraisers to value properties, but typically charge the borrower for their services. Typically, banks under the heading of “legal and technical value” charge a flat rate for the same. Charges for this, which the applicant must pay while his home loan application is being processed, may differ from bank to bank but commonly range from Rs 5,000 to Rs 10,000.

Depending on the loan-to-value ratio and the borrower’s ability to repay the loan, the bank will decide how much of the value determined after the appraisal process it would lend you. The majority of banks in India provide home loans for 80% of the stated property value following a real estate appraisal. For instance, if the property’s appraised worth is Rs. 1 crore, a bank with an 80% LTV ratio will lend you Rs. 80 lakhs as a home loan, leaving you to come up with the rest of the money on your own.

Despite the huge financial implications, buying a home is frequently a very emotional decision. As a result, if a buyer really likes a house, they might be willing to spend more than the property is worth. Financial entities, on the other hand, assess a property using a “no-nonsense approach.” It is undoubtedly not worthwhile to complete the purchase if the asking price for the property is significantly greater than its true worth, as determined by the property appraiser. In this situation, the buyer and seller should renegotiate the terms of the agreement in order to reduce the price to its fair worth. It would be in your best advantage to walk away from the deal if the seller is unwilling to do so. It might not be a smart idea to buy such a home using your own money to boost the down payment, since this would lead to an endless cycle of overvaluation. The property would once again be valued lower than the price you would propose when you tried to sell it in the future.

The seller may request a second assessment from the bank if he believes the first appraisal contained errors and failed to adequately describe the property’s important features while assigning a value to it. However, the vendor will be required to reimburse the bank for this. The bank will also keep the borrower’s home loan application inactive until the second appraisal is completed.

Disclaimer: The opinions shown above are mainly for informational reasons and are based on market research. Deal Acres is not responsible for any actions made as a result of relying on the provided material and makes no representations as to its accuracy, completeness, or reliability.