Do you know how much your house is worth? And the house you want to buy? What determines the value of the house for the financial institution and, therefore, for granting you a mortgage to buy a house is the appraisal value of the house.
In fact, a home appraisal is a mandatory procedure when applying for a mortgage, although it also has other uses.
What is a home appraisal and what is it for?
Essentially, a property appraisal is a written document that reflects the market value of a property. In fact, it is an official process that is regulated by the Bank of Spain, under the ECO/805/2003 standard, to guarantee a certain value over a period of time.
The main use of the appraisal is in the granting of mortgages. Its purpose is to allow the financial institution to know the real value of the property in order to decide whether it is interested in financing the acquisition of that property or not. In fact, the maximum amount to be financed for the mortgage is calculated as a percentage of the appraisal value or the purchase price (the lower of the two).
In other words, it is a procedure that serves as a guarantee for banking entities and is mandatory. Therefore, if you are thinking of buying a property with a mortgage, you will have no other option than to resort to an appraisal.
This process is very important not only for the bank, which will have an official guarantee on the cadastral value of the property , but also for the buyer, who will know how much the house is worth.
How is a home appraised?
The appraisal is a relatively simple process.
The first step is to contact an appraiser so that an appraiser can visit the property in question. During this visit, he or she will take photographs, consult the plans of the property or draw them up, observe and include six sales transactions of properties with similar characteristics in the area, certify that there are no urban irregularities and confirm that the final report complies with the criteria and is correctly valued.
The appraiser must visit the property in person and carry out all the procedures mentioned above. In addition, he or she may also request certain documentation from the owner in order to prepare a final report in accordance with the regulations.
Who chooses the appraiser?
The choice of appraiser is entirely free and the decision and payment for this operation falls to the buyer. The only requirement is that the appraiser is certified by the Bank of Spain to be able to prepare this type of report. However, there are some banks, especially the larger ones, that offer a free appraisal service if the mortgage is contracted with them.
If you prefer to hire an independent appraiser who is not provided by the bank or simply because the bank does not offer this service, you must have a qualified professional certified by the Bank of Spain. If he or she does not have this certification, then his or her report will not be valid for the bank.
When is the property appraised, before or after the deposit contract?
It is not really established when this process should be carried out, whether before or after the deposit contract, but it is most advisable that it be done before the formalization of the contract.
It is worth mentioning that the deposit contract is a private document signed by the parties to reserve the property. This document may also include some type of financial deposit so that the owner of the property can keep the property for the potential buyer until the buyer completes the necessary procedures with the bank to obtain the mortgage.
So, if you are thinking of buying a home and you are going to sign a deposit contract until the bank grants you the mortgage, you should order the appraisal before signing the contract to know what the real value of the property is and make sure that you are not paying above the market price in the area.
How much does a home appraisal cost?
This payment is usually included in the initial mortgage payment, the famous down payment. In this concept, 10% of the final value of the house is allocated to paying taxes and other types of expenses such as notary fees . These also include the appraisal of the house. Although, as we have mentioned, some banks offer this service for free and deduct it from this initial amount.
However, if the bank does not offer it to you for free or if you prefer to have an independent appraiser, you should know that the average cost of this operation varies between 200 and 500 euros. The price fluctuates depending on some characteristics such as the location of the property, its size, its condition, the purpose of the operation or a series of other factors. However, it is usually found in this price range.
In short, what you should know is that the appraisal of a home is a mandatory process when applying for a mortgage so that the entity has a guarantee of the real value of the property. In addition, it is a process regulated and carried out by a professional certified by the Bank of Spain. The price varies between 200 and 500 euros, but some banks may offer it to you for free when you take out a mortgage with them.
