The first step that is taken by bank of financial institution when a home loan application is received is to have the property valued. This is usually not done by the bank staff themselves. They either have a panel of valuers in their fold or they outsource the activity to some good valuation company Melbourne. What are the reasons for having the properties valued before deciding on the loan amount. Let us try to find some answers for the same.
First and foremost, the loan amount would basically depend on the market value of the property. Though there are some informal ways and means by which the value can be found out, when it comes to lending thousands of dollars of home loan to customers, there ought to be an authenticated and legally accepted source which will be able to give a report on the valuation of the property.
Towards this objective seeking the services of a good and professional property valuer is very important for banks. Only on receipt of the valuation reports are matters taken forward. However, valuing such properties that come up for bank loans is not easy not because of the complexities. It is simply because of the numbers that could be landing on a valuers table. Hence, if you wish to be a successful property valuer for banks you should understand the need to handle to big volumes having very tight and highly demanding time lines.
Whenever a decision to buy a home or some other property is taken, the first thing that comes to our mind is the need to source funds for such purchase. There is no doubt that banks and financial institutions are the major source of funding for most of the customers. However, when applying for a home mortgage loans there are a number of steps that need to be gone through. One such step is getting the property valued by an independent property valuer. Let us try and find out why valuation is very important for mortgage home loans and how exactly it is done.
The main reason why valuation of property in Brisbane is very important for banks and financial institutions is quite obvious and not very difficult to understand. Banks lend money to borrowers for constructing or buying homes and apartments. Once the loan is disbursed, the original documents of the property stands pledged with the banks and therefore the property in question also remains mortgaged to the bank as security. While all this is fine, it is not always possible for the bank to lend money based on the valuation show in the property sale deed alone.
It is here that the role of an independent third party valuer become very important. They help in ensuring that the valuation shown in the sale deed is not way off from the actual market value that the property commands at a particular point in time. This is very important because when taking a lending decision, the banks totally depend on the sale deed price and the valuation report that is generated by an independent third party valuer.
Hence, it is not surprising to see that a major chunk of business for real estate valuers comes only from banks and financial institutions. This goes to prove that property valuation and mortgage home loans are closely interconnected.
It is quite obvious that only 2 out of 10 people would be in a position to buy homes from their own funds without taking recourse to loans. While the dream for owning a own home or apartment is quite overpowering, lack of finance often comes in the way. In such circumstances the only option is to go in for home loans or property loans as they are also referred. Today, almost all banks and financial institutions have become extremely aggressive in lending loans for construction of homes, purchase of new homes or for buying strata-buildings and apartments. Many of the customers often do not do their homework properly when it comes to borrowing home loans. It would not be right on part of the customer just to go in for the first home loan that comes their way. It is important to take such vital decisions after a lot of due diligence. It has to be kept in mind that mortgage home loans are very long in nature and hence they must seek help of the right property valuers in perth to be able to get perfect idea about value of the house.
The first step before going in for any type of home loan is to find out how much you can contribute as your share for such loans. No banks or financial institutions would be willing to fund 100% of the cost of the entire property but for some very rare and extremely special circumstances. Hence, as a borrower you should be ready with your margin money and usually this is around 15% of the cost of the property. The next important thing is to find out how good your credit history or credit score is. This has a major bearing on the quantum of loan, tenor of loan and most importantly the interest rates that will be charged for such loans. Hence, it is always advisable to keep your credit history clean and blemish-free to the maximum extent possible.
You should be willing to move around and do some window shopping and take inputs from as much banks and financial institutions as possible before actually zeroing in on one particular bank or financial institution. You should be all eyes and ears to be on the lookout for some hidden costs in terms of processing fees and other such charges. You should also be well informed to make a choice between fixed rate home loans and floating rate home loans. If the tenor is short then it is better to go for variable rate loans because you will be able to come out of the loan liability that much faster though you may end up paying something more by way of interest.
Since home loans are a long term liability and you also have some tax benefits available against such loans, these figures must also be factored before signing on the dotted line. You should be left with enough funds to run your family. You might be an individual when you might have taken the loan but since many mortgage loans could run for more than 15 to 20 years, you must keep your long term expenses and requirement of funds before committing yourself for such long term liabilities.
There are many banks which also offer the facility of paying back your loan in installments and you should always keep this option in mind. However, you should again do a careful calculation and find out whether it makes sense to reduce your mortgage loan liability or invest the money elsewhere and earn some profit out of it. In fine, while getting a home loan is not a big problem, proper planning and forecasting is of extreme importance.
One of the biggest factors that have a bearing in the quantum of your home loan, is your current age, income, other liabilities and last but not the least your credit history. Additionally, the cost of the home or apartment, the margin money that you are ready to pool is also important considerations which could affect your home loan.
Apart from the above, there is one more important component which many of us often tend to overlook. It the value of the property as authenticated and certified by a competent real estate valuer. Though each and every property will have a market value and also a value that is mentioned in the sale agreement, taking a buying decision on this information alone is not sufficient. The values need to be verified and certified by an independent valuer having rich experience and expertise in this area of operation.
Hence, if you are planning to buy a home, you should understand the importance of taking the help and services of a property valuer. Apart from giving an honest and transparent report on the fair market value of the property, the valuation report will also contain a number of other subjective information which is very useful to the borrower.
Even banks and financial institutions place a lot of importance to the valuation report of a professional valuer. The loan amount sanctioned, the interest cost applicable to it, the tenor of the loan all have a bearing on the quality of valuation report that is submitted by real estate and other property appraisers. Hence, there is no doubt that if you are looking for your dream house and are dependent on banks and financial institutions for funding of the same, you must keep the importance of valuers in mind.
Many property valuers are not only good at real estate valuation, but they perform other valuation involving movable and immovable assets such as machinery, stocks and share, commodities, etc.
Given the above market and competition scenario, it is only natural for real estate valuers to find out new ways and means by which they can increase their business. Though the scenario looks quite tough, it is not completely insurmountable to say the least. All that it requires is to find out ways and means by which the risk can be spread far and wide. The biggest problem for most of the property valuers is that they are dependent on just vanilla property valuation to run their business. While this type of valuation might still be giving the major chunk of business, it is becoming very crowded here. Hence, good and intelligent property valuers are those who can look at other ways and means by which they can increase their revenues. There are quite a few such ways and let us have a look at them over the next few lines.
There is a big market for compensation, backdated and retrospective valuations which should never be overlooked or underestimated by real estate appraisers and valuers. Since these are quite complicated valuations, the fee payable is much higher and therefore it offers a great chance to increase revenues without having to look very hard outside. This apart, it is also vital for property valuers to look beyond real estate valuation alone.
Today, banks and financial institutions offer opportunities for different types of valuations. For example, home mortgage loans are a big chunk of business for banks. However, before disbursing such loans they will have to take important inputs from real estate valuers and this could be a continuous opportunity for business. In the same way, apart from real estate, banks also require valuation of plant and machineries and other movable and immovable assets belonging to their customers. This is without doubt a great opportunity which must not lost sight of.
To conclude, there is also a need for property valuers to look at the various methods of property valuation and to give a report based on the method which is beneficial to the customer.
The biggest source of business for any successful property valuer comes from the retail customers. They form the backbone of their business under most of the situations. However, this apart there are other big sources from where also property valuers get a big chunk of their business. These include banks and financial institutions. In fact if you look at the success stories of quite a few real estate valuers, you would be certain that the banks and financial institutions have had a big role to play. Most of the retail customers have to approach banks for home and mortgage loans. Hence, whenever such a request for home loans comes to any bank, the first thing that they do is to raise a request for property valuation. These requests are by default given to their approved list of real estate valuers. Therefore, this is an ongoing business that keeps coming to them over and over again.
Apart from the individual customers and banks, the government is also an important contributor for business to real estate appraisers. Whenever there is a need to complete a socially important infrastructure or other projects, land belonging to private individuals and entities needs to be taken over. When this happens, the individuals and other entities are entitled to receive compensation from the government authorities. For giving the right compensation there is a need to value the property in question. It is here that the role of a property valuer assumes significance.
These apart there are many other ways and means by which property valuers are able to get business. Good real estate valuers venture out to other property valuations too. They value big machines and other immovable properties and also intangible assets like stocks, shares and commodities. All these go a long way in keeping a continuous flow of business to real estate agents who have been successful in building their business. However, in conclusion, being successful in the real estate valuation business is a long and arduous journey to say the least.
There is no doubt that the main ambition of any job goer or a small businessman or woman is to have a home of their own. In most of the cases, it would not be possible for them to fund the entire home purchase from their own resources. It is here that banks and financial institutions chip in and play a big part in helping turn dreams into reality for thousands of families. However, banks would like to be sure that they are lending the right amount, to the right entity, at the right price and for the right tenor.
All this calls for evaluating a mortgage loan proposal from various angles. The credit angle, the income angle, the risk angle are a few that come to our point. The role of property valuers when it comes to a loan application is very vital from the bank’s perspective. In fact it would not be an exaggeration to point out that this is one of the most primary tasks of a bank credit appraising official. Whenever an application for a mortgage home loan is received, he or she triggers a request for valuation of the property under question.
It is therefore quite normal for banks to have a number of registered and qualified property appraisers in their fold. Their main job is to evaluate the property from various angles and submit a valuation report. The valuation report amongst other information mentions the fair market value of the property as envisaged by the valuer. The figure is not arrived at just by some simple calculations. Calculations apart there is a lot of subjective information that is taken into account before actually coming out with the valuation report.
Hence, the role of property valuers is very important. Since the number of such applications could touch quite a few dozes on a particular the challenge for many property valuers is to ensure that the reports are submitted on time. This calls for having a well oiled process and procedure in place.
Mos of the retail homes are purchased only because of banks and financial institutions are able to give loans to them. Hence, property mortgage loans form an important component of any banks assets. From the property valuers business perspective there is no doubt that banks and financial institutions contribute a big part of their overall portfolio. There are many reasons why banks also have to depend on real estate valuers for offering better service to their borrowers. Let us see how the entire process works.
First and foremost whenever a customer approaches a bank or a mortgage loan amongst the first few steps that it takes is to raise a request for valuation of the property. Usually banks have a list of pre-approved valuers in their panel. They raise requests to such valuers. The valuation report is very important because it forms the basis on which credit decisions are taken. Hence, it is the responsibility of the valuer to take steps to ensure that the valuation report not only reflects the far market value of the property but also goes much beyond this.
Any good valuation report also talks about the development of the neighbourhood, the kind of people who form the locality and also the condition of transports, roads, hospitals, schools and colleges. These subjective information will never be available for any banks from any other reports and hence they put a lot of importance on the reports submitted by the valuation companies.
The number of loan applications that come into banks could run into dozens per day and hence banks would have to totally depend on the the valuers for timely submission of the reports. Time is a very important consideration that must be given a lot of importance as far as valuers are concerned. They are the right right service providers who have the required infrastructure, people and wherewithal to complete the entire job within a time stipulated by banks.
Whenever a prospective customer applies for bank loans for funding his or her dream property project there are a number of factors that are taken into account before the loan is disbursed. These include the income generating capacity of the individual as of now and also in the future. This is because almost all home loans are long term liabilities. Apart from the stability and long term durability of such income, his credit worthiness is also taken into account. His previous track records as far as other loans are concerned is a clear indicator how good or bad his credit history is.
Apart from the above, the lender would like to know whether he is lending money on a property that is at least worth the loan that the customer is seeking. Though there could be a mention of the value in the sale deed agreement and the market could also talk about a value, banks would like to have it authenticated by somebody who is an expert in valuing. It is here that the role of property valuer becomes very important.
So, whenever a customer approaches a bank or financial institution for a loan apart from finding out the creditworthiness of the customer, the bank’s other important function is to have the proposed mortgage property valued by an expert. These experts are valuers who have rich experience and expertise in this field. They look at the property from various angles and then come out with a valuation report. This report forms one of the important basis on which a credit lending decision is taken.
There are a number of factors that could influence the value of a property from the property appraisers perspective. It could be the location of the property, the age of the property if it is an old one, the size of the property, the type of construction materials that have been used and last but not the least how well developed the neighborhood is. So if you are planning to buy a property as a retail customer it is always advisable to pay attention to the above points because of obvious reasons.
Almost 95% of all the property that is bought in this country is through property loans that are arranged by banks and financial institutions. This is because it is almost impossible for the ordinary salaried or small business owners to arrange huge funds that are required for purchasing an average sized apartment in your city or town. So, there is always a big rush for property mortgage loans as far as banks and financial institutions are concerned. Let us over the next few lines try and find out how property valuers have an important role to play in the entire loan sanction and approval process.
Whenever a customer approaches a bank or financial institution for a loan, the banks looks at the application from two basic angles, risk and credit worthiness. The latter is determined by the previous track history of the customer, his present income earning capacity and his repayment capacity over a long period of time. The former, i.e. risk is evaluated again by various factors and the most important one is based on some points related to the property itself. Whenever a bank looks at a property loan, they would like to know what the property is worth. Though the market is a good indicator as far as the rate of a property is concerned, it may not be prudent to go by this figure alone. It has to be corroborated by an independent authority and this is where the role of a property valuer becomes very important.
Let us look at a simple process flow when a bank receives a property mortgage application. Even before the other steps are taken up, the bankers raises a request with the property valuer to value the property. This report plays a vital role in deciding on the loan amount, the tenor of the loans, interest chargeable and so on. Only if the report is favorable does the bank go in for the next steps. Hence, there is no denying the fact that property valuation forms the backbone based on which loan amounts and sanctions are decided by banks.
This certainly is great news for budding real estate valuers who wish to make it big in their profession. It is all about being steadfast in this business and the results will automatically come. As professional real estate agents you should be willing to put effort, be honest and transparent and give value-add propositions to your customers. You should be a one stop solution for almost any type of real estate valuation that one could think of. It is a long term journey and it would be difficult to expect results overnight.
Why is property valuation so very important? Let us try and find out the reasons especially from the point of view of mortgage loans. Banks extend property loan or mortgage loan to customers based on various factors. They usually take into account the age of the customer, his earning and income generating status, his marital status, just to name a few. His credit rating is also a very important consideration when it comes to taking a loan. Apart from that banks also need to have a comfort level as far as the value of the property is concerned. As a thumb rule, the loan amount that is disbursed to the borrower should never exceed 80% of the market value of the property. But how is market value calculated? There are different ways and means by which this can be done. Banks can take a cue from the value of the property that is evident from the market place. However this is only an indicative rate and there should some ways and means by which this could be authenticated. Towards this objective the role of a government approved valuer becomes extremely important.
Let us try and understand the process flow whenever a bank or financial institution receives a mortgage loan application. While other due diligence processes go on simultaneously, the first act of the bank is to send the property details to a registered and government approved valuer. His job is to carefully look at the property and then come out with a valuation figures taking into account a number of factors. This document forms a very important decision making piece of information for the bank. Even if the customer holds a good job and draws a decent income, banks may not fund his full loan requirement unless the value of the property justifies it. This is because when the valuation specialists submit their valuation report, they take a lot of things into consideration. They take into account the condition of the property, the age of the property, the neighborhood in which the property is located and the area in which the property falls. The infrastructure facilities available, the transport facilities available, and quite a few other factors are also taken into account when submitting the valuation report.
Hence, as a customer you would always do better to look for properties that are located in reasonably well developed areas. Though it might cost a bit more it is worth it because you will be reasonably sure that your bankers will be ready to fund almost the entire cost of the loan. Towards this objective, there hardly is any doubt that valuation has an important role both for the banks and also the customers desirous of taking loan from them.