Valuation when buying a house

Why an appraisal when buying?

Once you have made the decision to purchase a property, the property needs to be appraised to determine its assessed value. In addition, the mortgage lender will require you to have an appraisal done at the time of purchase. This must be done by a certified, independent appraiser. The role of having a mandatory appraisal done on a property you are purchasing does not apply to consumers who pay for the entire property purchase at once.

A building inspection is done during a building inspection. This is advisable when you have bought a house before 2000. A building inspection with having a property is not compulsory, but it is recommended to check for any hidden defects.

Benefits of a valuation report when buying a property

Despite the fact that a valuation is required when buying a house, there are main advantages:

• Objective: The valuation report provides an independent and objective valuation on the purchase a property.
• Clarity: An appraisal report provides clarity on the actual value of the property.

A home appraisal is carried out by a qualified appraiser, such as with the NVM/WVI qualified appraiser looks at the home as follows:

• Looks at the property thoroughly
• The current condition of the property
• The size of the property
• The location of the property
• Any special features and/or characteristics
• The neighborhood where the property is located
• The surroundings of the property
• Recently sold properties in the neighborhood

After the appraiser has gone through these above points, an appraisal report is drawn up stating the value of the purchased property.

Valuation required when buying a house: The influence on the maximum mortgage

The valuation when buying a home has a major impact on the amount of mortgage you can take out. The value of the home, as described in a validated appraisal report, determines how much a mortgage lender can provide with the purchased home. The mortgage lender does not want to lend more money than the property is worth. If the appraised value is lower than the purchase price, you can no longer afford the mortgage payments on the purchased home.

If you can no longer afford the mortgage payments on the purchase, the bank belongs to the property. The bank will sell the property to minimise its loss. Since the appraised value is lower than the purchase amount, the bank does not want to run that risk. This is one of the reasons that a valuation is required when buying a house.

Example calculation:

Disbursements: Additional costs of valuation report

Disbursements are additional costs incurred in producing a valuation report. A standard mandatory valuation with having a property, the valuation models and knowledge are not always sufficient. There are certain factors that affect the value of the property that are not initially noticed. Some of the factors that affect these are:

• Changes in policy by the municipality or province
• Changes in zoning plans
• Exemption

This information can be requested from the municipality. These are costs associated with requesting information. The costs can vary depending on the municipality. As a result, municipalities may have more expensive than the standard valuation costs. In all cases, in addition to consulting the land registry, an appraiser will also be consulted.

Unfortunately in practice, it is often necessary to check whether the seller is actually the owner of the property and has the right to sell the property.