08/04/2014
The importance of property valuations
Property valuations are a necessary step in the home buying process.
There is a lot of confusion out there regarding the truth about valuations. Some people are confused about their purpose and often think of them as engineers reports. Some people think that a low valuation for their home is the kiss of death. People should take the time to learn the facts about property valuations. The more people learn beforehand, the better prepared they will be to tackle this crucial step.
Your mortgage approval is contingent upon the results of the valuation.
It is as simple as no valuation, no loan. Since very few people have the ability to pay for a house with cash, the valuation is going to be necessary. A loan is never going to go through without a valuation. The purpose of the valuation is to establish the home’s market value. The mortgage approval will be based on the market value.
The main goal of the valuer is to protect the lender. Lenders don’t want to be stuck with property that is not worth its price tag, so the valuation must be completed before the lender will approve the loan. The information contained in valuation is invaluable to the lender. The lender will study the details of the valuation before reaching a final decision. It makes sense. If they are going to be funding the transaction, they should be aware of the property’s value.
The lender will often dictate the choice of valuer. It might have a panel or direct you to one in the area. If you go with your own choice for valuer who’s not on the bank’s panel, they may be subject to final approval from the lender.
Residential properties are normally appraised using either the sales comparison approach or the cost approach. When using the sales comparison approach, an appraiser compares the property to similar properties that have sold in the area and bases the market value on the comparables or comps. The cost approach is based on the costs to build, which means it is more appropriate for new properties.
The actual valuation reports are very detailed. They contain information about the subject property along with comparisons of a few similar properties. There is an evaluation of the overall house market within the area. The valuer will then list any issues that he or she feels might diminish the property’s value. The next component is a list of any serious problems like bad roofs or weak foundations. The valuer then gives an estimate of the sales time for the house. Finally, the report will indicate the type of property.
It is important to note that the property valuation is not the same thing as an engineers inspection. The valuer might make note of any problems they see, but they are not responsible for declaring if your home is in good condition or not. They are only responsible for assessing the property and determining the market value for the lender.
A structural report is a different process altogether.
Property valuations only include the home, the land, and any improvements to the land. It does not cover any personal property that might be sold with the house. The buyers should purchase those items separately.
Everyone fears the possibility of a low valuation. It happens all of the time, especially in the current climate. There are some things you can do to remedy this common but stressful situation. The buyer can make a larger down payment. If this is not feasible, the seller and buyer can negotiate the price some more. Additionally, the valuation can always be disputed.
What all goes into a valuation? Valuers are looking at the condition and size of the house, its proximity to good schools, and the size of the site. Valuers do not look at dirty dishes or overflowing laundry baskets. They do care about chipped paint, broken windows, and appliances that don’t work.
Valuations are not being conducted by just anyone off the street. Real estate valuers are trained professionals.This line of work demands strong critical thinking skills and the ability to interact with different groups of people.
