What Is Real Estate Appraisal, And How Does It Work?
“The major fortunes in World have been made in the land.”
For any property you own, the right way to analyze it is to know the actual value of your property. If you buy a home for living, investment, or refinance, you are bound to undergo an appraisal process.
An appraisal can be tedious, especially when someone is amateur in the process, and can also get overwhelming. We need to know the basics of home appraisal.
A real estate appraiser expert plays an important role here and can tell you the real value as a customer, which is extremely important. Real estate appraisal tools are critical in India because many factors can wrongly influence its final value. It is necessary to get a value report made. For example in Mumbai, the appraisal value of a flats in Mira Road is determined by various factors such as the property’s location, size, age, condition, amenities, and the prevailing real estate market conditions. Here are some factors that should be a part of your home appraisal report:
The size of the property:
Your property size is one of the essential factors defining the price of your property. It also differs according to the area you have smartly used and how the current space has been made use of.
Age of the property:
The property’s age is essential when buying a home as it defines how much more one can live here.
Change: the longevity and quality of your stay there.
Many people, especially in Mumbai, have started to opt for old properties since they are available at a lower price and have a high chance to go under redevelopment.
Location of the property:
The location of a property as a whole has a lot of factors. Ranging from neighbourhood to safety, all come under the property’s location. If the property is away from the main road, it is priced differently than a property located on the main road or in a township. Investing in a 2 BHK flat in Mira Road is a promising future investment opportunity compared to other locations in Mumbai.
The structural strength of the home:
The structural strength of the house includes everything that has been changed from the original layout and the wear and tear that has happened over the years. Changing the original structure is also an issue since the new owner might not like the change and will pay less if there’s a lot of work to be done.
The current level of deterioration in society maintenance:
Every structure, as we know, goes through wear and tear. It also depends on how well the society has been maintained and how safe the residents live there. Therefore, these structures must go through structural audits promptly and can also be distinguished based on the residents.
Rental prices define a lot about your complex. For example, if other families are paying substantial rent to live there, the new buyer believes there must be something good about this place and the investment.
A leading article on housing.com says, “Most banks in India offer 80% of the property value, as specified after property appraisal, as the home loan. So, for example, if the appraised value of the property is Rs 1 crore, a bank with an LTV ratio of 80% will provide you Rs 80 lakhs as a home loan, while the remaining amount will have to be arranged from your sources.”
Who pays for home appraisals?
When applying for a loan, home appraisals are usually paid by customers and come under the domain of technical and legal valuation charges. The cost for real estate appraisals that the bank charges are between Rs.5000 to Rs.10,000. A professional property appraiser is responsible for a full-fledged home appraisal audit. A home appraiser can use two property valuation methods in India:
Sales comparison property appraisal method:
Sales comparison property appraisal method is when the appraiser compares the quoted price with recent transactions or the selling price of other homes in the neighbourhood. The correct information can be obtained via different government offices or sources(agents) who have gotten the sale done. However, this is not the best option considering factors like financial need and time can influence it.
Cost approach property appraisal method:
In this method, the appraiser makes a sheet of factors of your house and then comes to a final price. The cost approach method is solely done based on your current home situation. This can be a more secure method to do it, considering selling a home by other people can be influenced by other factors.
This may come in handy to you as well to help you understand a lot more about real estate contract elements.
Does home appraisal help first-time buyers, or should one opt for it?
A Home appraisal is a well-known technique worldwide and is a must before buying a house, but it is not very famous in India. It should be favored in India because of its crucial monetary decision. 65-80% of people are looking to buy a house in India almost yearly. Unfortunately, around 43% of people fall prey to housing scams in India which is high considering our technological advancements.
When the bank hires a professional appraiser, they usually use a “no-nonsense” approach since they are unwilling to issue a higher-value loan than the home is worth. However, an independent buyer without a home appraisal report may over-pay if one likes the house very much, especially as a first-time buyer. This might give you the reality of your home, and the decision will be yours.
Tips for the seller:
In metro cities, many of us plan to sell our flats or even buy them for investment purposes. So here are some records you must keep that might help in a better appraisal of your property:
- Annual tax bills.
- Furnished plan of the house.
- Keep a detailed tab of your changes to the original house plan. (Electric and other points)
- Get pest control done constantly and also keep a record of it.
- If you have given your property on rent, look for tenants that will maintain the place well.
- Keep all the original ducts accessible by the appraiser/surveyor.
Sometimes an appraiser can also be wrong, and you might not be satisfied with the final valuation of your home. Then, in such cases, you can approach the bank and get it done again by paying the fees.
Every survey the bank does is only to get a clear picture for all the parties involved.
AsmitA India Realty aims to provide family homes that are futuristic and smart but within your budget. Our team is always available to guide you at every step and moves ahead only with complete transparency.
If you have ever been through a home appraisal experience, we would love to hear more about it in the comments section.
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