How to evaluate an apartment for a mortgage

Valuation of an apartment for a mortgage is a condition on the basis of which banks provide a loan. You won’t be able to evaluate an apartment for a mortgage on your own. To do this, you will have to contact an accredited agency. Where to look for it, on what basis to choose, is it possible to do without appraising an apartment and get a mortgage - read in our material.

Are you planning to take out a mortgage?

The question “how to evaluate an apartment for a mortgage” arises at the stage when the bank has already pre-approved you for a mortgage, and you have already chosen the apartment that you are definitely going to buy.

What does this mean:

You have decided which bank you will take out a mortgage loan from, you are satisfied with the proposed terms and interest rate. You have already submitted a 2-NDFL certificate from work, a copy of the Work Book. And the bank assessed you as a reliable payer and is ready to provide a mortgage loan.
Of all the options that you chose yourself, or with the help of a realtor, you left one - with specific indicators for area, number of floors, year and type of construction and, of course, price.

Now you need to evaluate the apartment for a mortgage. If you take the missing money from the bank, there is no way around this issue, and here's why. While you are paying off the mortgage loan, the apartment is a property with an encumbrance and is pledged to the bank. In other words, it does not completely belong to you until you return the money you borrowed from the bank. If this does not happen for various reasons, and due to circumstances you are unable to make payments, the bank will seize the apartment from you and sell it at auction to recover the invested funds.

Assessing an apartment for a mortgage will show how easy it will be to sell.

By the way, valuing an apartment for a mortgage also has its own benefits for you. Because Even on the shore, you will be able to understand whether the apartment is worth the money they are asking for it or not. If it is sold above/below market value, then this is a reason to think about it. Especially if it is below the market value - this situation may indicate that your seller is on the verge of bankruptcy, which in turn carries the risk of losing the apartment. Because the transaction in this case can be contested in court.

How much do appraiser services cost?

This question cannot be answered unambiguously. Each company or specialist has its own price list. It all depends on the image and experience of the company itself. The cost will also be affected by the location of the office and the conditions for conducting the examination.

Average appraiser prices:

For the capital, you should focus on 3000-5000 rubles.
For regions the cost is about 3,500 rubles.
For residents of small towns, the services of an appraiser will cost 2000-3000 rubles.

It is worth considering that when assessing objects located in remote areas, the cost will be slightly higher. The customer will have to pay the travel costs of the assessor.

In most cases, the cost of the examination falls on the borrower's shoulders. It is he who is interested in the speedy completion of the transaction. The bank does not bear these financial expenses. VTB 24 is ready to provide only a list of accredited borrowers.

Accordingly, the seller will also not pay for the appraisal of the apartment. He will not give money for checking his own home. Only the buyer is interested in appraising the apartment.

In turn, the bank will not sign a mortgage agreement without an appraisal report. There is only one way out - the borrower will have to independently find an accredited appraiser and fully pay the cost of the examination.

Who evaluates an apartment for a mortgage?

Appraisers evaluate an apartment for a mortgage. You can see the list of agencies accredited by the bank where you take out a mortgage on the bank’s official website. Or a realtor will tell you this information if you buy an apartment and arrange everything through a real estate agency.

Let us remind you that appraising an apartment for a mortgage is an official matter; the “guy down the street” cannot conduct it. The activities of appraisers are regulated by the Federal Law “On Appraisal Activities in the Russian Federation,” which clearly defines the basic requirements for an appraiser. This could be a company or an individual entrepreneur. In any case, the person who will conduct the assessment must have:

specialized education,
membership in SRO,
insured liability.

An example of a report assessing an apartment for a mortgage

Documents required when conducting an appraisal for a mortgage

Regardless of whether the report is prepared by an expert accredited by the bank or an independent specialist, the borrower must collect the documents necessary to carry out the procedure. The list of documents required to evaluate an apartment with a mortgage usually includes:

document certifying ownership (sale and purchase agreement, registration certificate, etc.);
floor plan and explication of the apartment;
cadastral passport;
passport of a citizen of the Russian Federation.

How to choose a company to evaluate

If you select a company yourself, the following algorithm looks reasonable. From the many companies that are presented on the bank’s website (Sberbank, for example, has a list of about 90 companies), you select 10-20.
Then monitor their websites, the section on prices, terms and additional services.
If necessary, you can call and choose one.

When choosing, you can focus on the following indicators:

Estimator visit time: 1-2 days.
Report completion time: 3-5 days.
Price. May vary. In megacities it starts from 2-3 thousand rubles.

What is an apartment appraisal report?

Externally, the report assessing the apartment resembles a bound course paper. The assessment data is printed, numbered and stitched. We will talk about this at the end of the report. On the title side of the report, data on the apartment is displayed: the address at which it is located, the full name of the customer and the borrower (they may not match if you asked someone else to handle this report). The date of determining the cost and the date of drawing up the report are also indicated: this is important because the report is valid for six months from the date of its preparation. That's why, for example, when you are going to refinance your mortgage, the new bank will again ask you to do an appraisal of the apartment and bring a report.

What information is contained in the report:

Evaluation standards;
Information about the appraiser and the customer;
Description of the apartment and determination of the physical deterioration of the building;
Location and photographs of the object;
Review of the real estate market, analysis of apartments similar in quality and location to yours;
Determination of market value and liquidation value.

What documents will you need?

In order for the assessment of the value of a property to be checked quickly, the customer should prepare a certain package of documents, including:

application form;
a document establishing rights to the property;
copies of passports of borrowers and co-borrowers;
equity participation agreement (EPA) in construction, if any;
real estate seller's passport;
cadastral and technical passport of the property;
current BTI plan.

Attention! The specified list of documents is not exhaustive, and additional papers may be required from the client.

If the property being purchased is located in a house that has not yet been put into operation, then you will additionally need a DDU and a building permit.

What is the cost

The appraisal of an apartment for a mortgage will include two types of value: market and liquidation.

Market price is the price that can be obtained for an apartment by selling it without haste or force majeure.
Liquidation - those funds that can be obtained for an apartment if it needs to be sold as quickly as possible. For example, buying and selling a one-room apartment will always happen faster than three-room apartments or an exclusive apartment with a terrace. And the one-room apartment, which is not on the first or last floor, will “go away” even better and faster.

To calculate both costs, the appraiser takes into account the condition of the apartment itself and the house in which it is located, and the price of apartments that are located in the area and are similar in size, layout, condition of the house, etc.

How much does a property valuation cost?

The cost of the report depends on the locality in which the property is located. The price ranges from 3,000 to 7,000 rubles. Experts evaluate the real price of the property, as well as the price of existing rights (if any). The area of the property, location, and date of construction are taken into account. Estimated completion time is 1-3 working days.

Traditionally, the document is drawn up by the interested party – the buyer. The exact order has not been officially approved. The report must be paid from the bank account of the buyer of the property. However, the funds themselves may belong to the seller if the parties to the transaction are able to find a compromise.

What is the market value of an apartment made up of?

Location. The appraisal of an apartment for a mortgage will always take into account the location where the apartment is located. What is important here is whether the house is in the central area or not. If not in the central area, then how good is the transport and social infrastructure there: are there schools, kindergartens, hospitals, etc. It also plays a role how favorable and well-groomed the area is overall. If a factory or industrial zone, military units, courts, pre-trial detention centers are located nearby, all this will affect the cost estimate.
Technical characteristics of the building. Here we mean the year and type of construction, how long ago major repairs were done, whether the building is in disrepair or not, the number of floors of the house and layout. When choosing a “Khrushchev” or “Brezhnevka”, check especially carefully whether the house is designated for demolition or reconstruction, whether sewer pipes or heating have been replaced.
Condition of the apartment. The main parameters here, of course, will be the number of floors, number of rooms, layout (if redevelopment was carried out, then confirmation that it was legalized). In addition, the presence of repairs (high-quality or done in a hurry), household appliances, furniture that will remain after the sale will be used as increasing or decreasing coefficients. This also includes the presence or absence of plastic double-glazed windows and balcony glazing.
Market position. A comparison is made of similar apartments: a one-room apartment in a monolithic building is compared with the same offers. Up to 5 objects are usually selected for comparison: this makes it easier to understand where prices are artificially high or low. Don't forget about force majeure circumstances. Now, for example, due to the coronavirus, the solvency of the population has also decreased. On the other hand, there is state support, through which you can purchase housing in a new building, which also reduces the demand for apartments on the secondary real estate market.

Who orders the procedure

It is the borrower’s prerogative to evaluate an apartment for a mortgage. Therefore, the bank client himself orders and pays for the service. Sometimes you can agree with the home seller and split the amount between two.

Is it necessary to repeat the procedure when refinancing a mortgage?

A mortgage assessment of an apartment for a bank during refinancing forces the borrower to revise the conditions of the previous examination. Re-signing a loan agreement requires a re-analysis of the market price of the property if a period of six months has expired after the first assessment.

At its core, refinancing is the conclusion of a new contract. Therefore, the bank will carry out all the necessary operations again. Among other things, the lender needs to know how much money he will be able to receive if the deal is broken and the property needs to be sent to auction. Therefore, the report must also indicate the liquid value of the object. That is, how quickly it can be sold.

If the client intends to refinance before six months have elapsed from the date of the first real estate appraisal, then, in theory, a re-examination is not needed. However, practice sometimes tells a different story, and some banks require re-analysis and updating of the previous report. Therefore, in the event of re-concluding an agreement both with the previous creditor and with a new representative, you must first find out about the validity period of the already completed report.

We evaluate housing in a new building

There is no necessary need for a separate assessment of housing in a new building. The amount for the object is set by the developer and indicated in the share participation agreement. However, it is not uncommon for lenders to require a separate analysis of the market price of a new property.

What is the liquidation value of an apartment?

Liquidation value is calculated using a special formula. It is important for us to know that it is influenced by two basic factors:

Time value of money factor;
Factor of price elasticity of demand.

What is price elasticity of demand? This is the number of potential buyers and the degree of specialization of the object. The greater the number of potential buyers, the higher the elasticity of demand (and this is good). The higher the specialization of an object, the lower the price elasticity of demand for it (which is not good). In other words: if you buy a standard one-room apartment in a relatively new house, not on the first or last floor, with a standard layout, near the metro, then you will then sell it very quickly, because... A lot of people will want to buy it. If your apartment is a three- or four-room apartment with a designer renovation, or a townhouse outside the city, then you cannot count on a very quick subsequent sale

What is the time value of money?

You've probably heard that money gets cheaper over time. This is the time value of money: in a year, a thousand rubles, under the influence of inflation, will “worth” much less. Therefore, when it comes to selling an apartment, it is better to sell it within a reasonable time. Otherwise, relatively speaking, you will receive your desired 5 million for the apartment, but in a year. Accordingly, during this time they will have time to “get cheaper”.

When the apartment is sold at the liquidation price, the bank repays the remaining loan, and the borrower receives what remains after that. Therefore, it is to your advantage that the liquidation price is still quite high. By the way, for inexpensive standard apartments the difference between the liquidation value and the market value is small. Therefore, you can sell them quickly, as discussed above.

Is it possible to influence the outcome of a mortgage appraisal?

The desire to influence the appraisal of an apartment for a mortgage is quite understandable: it depends on how much money the bank will ultimately issue for the purchase. Even if the owner of the apartment values it higher, and the quoted price is very different from the market price, the bank will still focus on the market price indicated in the report. You, of course, can talk to the appraiser and ask to take into account the freshness and quality of the repairs, replacement of communications, remaining equipment or furniture. They have their own coefficients that can increase the market value of the apartment.

However, you should not resort to fraudulent schemes. By doing this, you will only harm yourself: the bank will make a note in your credit history that you tried to mislead it. Other banks will also see this mark. So stick to honest methods and good luck with your purchase!

Text: Alena Skvortsova