Real estate as an object of assessment

Everything has a price and everything is for sale. And most Russians associate a home with a real estate loan, which also has its own value.

Why do you need a real estate appraisal? Who is conducting it? How much is it? What documents are needed? How is the assessment procedure carried out?

In this article you will get answers to all these questions. The material will be useful to those who are planning to take out a loan to purchase a home or have inherited real estate.

What is real estate valuation?

Real estate valuation is the process of determining the value of an object . The procedure includes determining the value of property rights (lease rights, use rights) in relation to various real estate objects.

Real estate valuation as making a judgment about the value of real estate is structurally related to market knowledge focused on a specific object, and is one of its logical continuations.

The purpose of the assessment is to determine the value of an object in changing market conditions in order to make economically sound decisions in real estate transactions.

To solve the dilemma of what price to set so as not to sell yourself short, how to evaluate a contribution to a commercial enterprise, what loan amount to count on - all these are variations of the same question: how much does real estate cost? You will get the answer by conducting a real estate assessment. The more accurate it is, the more rationally the buyer’s funds are used.

Why is real estate appraisal carried out?

Real estate transactions requiring valuation:

alienation (sale, exchange);
contribution of property to the authorized capital of the company;
transfer of real estate as collateral;
rental;
obtaining a mortgage;
entry into inheritance rights.

The most risky undertaking is mortgage lending . The bank needs guarantees to minimize all risks. And a reputable financial institution will make every effort to minimize risks both for itself and for the borrower.

Legislative basis

The Institute of Valuation is regulated by Federal Law No. 135 of July 29, 1998, as amended. This document is the basis for the procedure to be carried out by authorized persons.

The articles of the law stipulate all the nuances of such activities in the Russian Federation, define the circle of persons conducting assessments, establish requirements and rules for the assessment of premises, and describe cases involving the establishment of an estimated value.

Who conducts real estate assessments

Legal entities or organizations licensed to carry out valuation work can conduct a monetary valuation of real estate.

What is peer review?

This is a document that contains information regarding the object of assessment - the rights of owners, goals, date of conduct, methods used, explanations.

Who carries out the real estate appraisal?

The appraiser must meet the qualification requirements

An appraiser can work independently as an individual entrepreneur or be on the staff of a legal entity. The main thing is compliance with the established criteria:

specialized education in the field of valuation activities;
experience;
membership in SRO;
no criminal record;
advanced training every 3 years;
compulsory civil liability insurance policy.

There are also requirements for appraisal organizations. A minimum of 3 years of experience in a professional field is required, with at least two employees with specialized education and more than 3 years of work experience.

Important! For the examination, you can involve both independent appraisers and specialists from organizations accredited by banks. The second option is most often used.

Independent appraisers

Independent experts do everything that an apartment appraiser is needed for with a mortgage: determine its value and condition, and draw up a report. But the bank may not accept the conclusion, expressing disagreement with the price or citing other reasons. If the company is not accredited by a financial institution, it is better to immediately contact one who is accredited so as not to waste your time and money.

The bank may refuse to accept the assessment of independent experts if they have not been accredited

Bank accredited appraisers

Accredited appraisers work under an agreement with a bank that recommends them to mortgage borrowers. These are organizations that meet all the requirements of the lender. Such cooperation is mutually beneficial: experts receive a constant flow of clients, banks receive well-written reports in accordance with their requirements.

Types of cost

In valuation practice, various types of value are carried out.

In accordance with the federal valuation standard “Purpose of valuation and types of value” (clause 5 of FSO No. 2), Article 20 of Federal Law No. 135 of July 29, 1998 “On valuation activities in the Russian Federation”, the value of real estate is classified into the following types:

market;
liquidation;
cadastral;
investment

Market price

The most probable price at which the object can be alienated on the open market in a competitive environment is determined. The value is indicated as of the valuation date.

The main conditions are that the parties must act openly and have all the necessary information.

Liquidation value

The influence of emergency circumstances is taken into account. An estimated value is determined that reflects the most likely price at which the object can be alienated during an exposure period that is shorter than typical, in conditions where the seller is forced to complete a transaction.

Cadastral value

A state assessment is established. It is determined for taxation purposes, calculating the amount of tax in the case of purchase and sale, rental, agreement of gift or exchange of housing, registration of inheritance rights, formation of the price when exchanging an object for an equivalent one.

Investment cost

Measures the effectiveness of an investment for a specific person or group of people for the stated purposes of using the property. When determining this type of value, it is not necessary to take into account the possibility of alienation on the open market.

What factors influence the cost of square meters?

Determining the price of an object consists of the following factors:

condition of the building;
year of construction;
categories of land plot;
provision of engineering communications;
location;
distance from the center;
security level;
quality of access roads;
type of settlement where the facility is located;
environmental situation in the area;
infrastructure development.

The appraiser's task is specific in that determining the value often becomes the subject of collateral for housing loans for housing under construction. How can you evaluate an object that currently exists only on paper? How can you be sure that it will be built and put into operation?

In practice, it is not ephemeral squares that are assessed, but the cost of rights to the object under construction. The price of future construction is determined based on the cost of existing facilities with similar characteristics.

The information can be adjusted taking into account information about the developer’s project portfolio, the stage of construction and the level of risks (developer bankruptcy, delays).

Housing under construction is usually priced lower than finished housing.

Real estate as an object of assessment

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Documents for real estate valuation

To determine the value of real estate you will need the following basic package of documents:

Owners' passports - if they include minor children, birth certificates (for children under 14 years old) or passports (for children over 14 years old) are also provided.
Documentation securing the right to the object - registered certificates of ownership if the following grounds exist:

purchase and sale agreements;
entry into inheritance;
deed of gift;
rental agreements.

Technical documentation - technical passport from BTI . This document should be ordered in advance, as its production requires a certain time. Also, along with the technical passport, a building plan with an explanation of the floor plan is provided, which records the following characteristics:
square;
number of storeys;
appointment;
date of commissioning;
layout;
wall material, ceiling height;
wear percentage.

Confirmation of restrictions and encumbrances - if the object is the subject of a seizure or pledge, you will need to submit a court decision, receipt or loan agreement:

certificate of state registration of rights or a document on the basis of which it can be carried out;
passport or equivalent document;
passport of the apartment owner (if the customer and the owner are different persons);
extract from the technical passport (from the BTI) - floor plan with explication;
description of encumbrances.

Documents for appraising an apartment:

If the apartment is an object of common shared value of several owners, documents are provided for each of the owners.

Apartment Valuation Certificate

The act establishes the real cost of housing. It is compiled by a professional appraiser who has a certificate and permission to carry out appraisal activities. The report is drawn up on a standard form and sealed with the seal of the organization that carried out the assessment.

Documents for home assessment

The following are added to the main list of documentation:

cadastral plan;
floor plan with explication (characteristics, area, layout).

What is an apartment appraisal?

An apartment appraisal is a procedure that allows the bank to determine the value of the property. If the client has already selected a specific home, the lender needs to calculate how much he will be able to sell it for if the client stops paying the mortgage. Until the debt is fully repaid, the property is pledged, so in case of large delays, it will not be difficult for the lender to sell the pledged property through auction.

If the borrower does not pay the loan, the bank initiates the sale of mortgaged housing through auction

During the examination, one of two types of value is determined:

Liquidation. This is the minimum price for which real estate can be sold in a short time. Most often used.
Market value is the real price for selling an apartment, based on average market prices.

Let's look at a practical example:

A person applied for a mortgage, having previously indicated the amount of 5,000,000 rubles. The bank approved it. All documents have been collected and provided, and the search for an apartment has begun. When it is found, the borrower collects documents, including an assessment report compiled by an independent organization. It indicates the liquidation value of the housing - 3,000,000 rubles: this is the amount, minus the deduction, that the lender will use to transfer to the seller after concluding the purchase and sale agreement.

What do they look at when evaluating an apartment for a mortgage:

Area. If the property is located in the city center, this automatically increases the price per square meter. Even if the apartment was built several decades ago, it will cost more than housing in a new building located on the outskirts.
State. If the apartment requires repairs, the appraiser will indicate this in the report. But potential costs will most likely be underestimated. You should not expect that they will include the costs of hiring a designer and purchasing expensive “luxury” materials. The maximum you can count on is the use of a multiplying factor.
Specifications. The year the house was put into operation, the date of major repairs, the number of floors, the state of repairs at the entrance, the presence of parking and a garbage chute - all this is important when determining the cost. The “younger” and more comfortable the house, the higher it is.
State of the market on the date of examination. The real estate market is affected by fluctuations in the ruble and other factors: for example, during a crisis, the cost of housing usually decreases. The expert takes into account several apartments in houses of the same type (monolithic, panel, brick) and compares their prices.

Housing cost calculation

Important! Salvage value is calculated differently, but the above factors are taken into account. It is important for the bank to be able to quickly sell the property in the event of long delays on the mortgage due to the fault of the client.

What does the range of real estate valuation work include?

To begin with, the customer must communicate the purpose of assessing the object. The range of real estate valuation works includes the following procedures:

task definition;
inspection of the facility;
drawing up an agreement for the provision of services;
collection of data on the object;
choice of assessment methodology;
analysis of property rights and operation of the facility;
assessment of improvements (presence of buildings, additional structures);
comparison of results;
report and expert opinion.

Documents required for appraising an apartment:

To conduct an assessment and prepare an assessment report, copies of the following documents are necessary and sufficient:

A copy of the apartment's passport (pages with explication and floor plan).
A copy of the document confirming ownership (agreement, certificate).
A copy of the owner’s passport (main page, and page with a stamp indicating the place of last registration)

Our independent appraiser can go to the site to inspect the apartment if only the last two documents are available (that is, in the absence of a passport, which is probably located in the BTI). In this case, the specialist himself will measure several parameters of the apartment, and the data will be sufficient to conduct a full assessment.

Main pricing characteristics

Four properties determine the value of an object:

Square.
Building type.
Location.
Transport accessibility.

Factors that increase the price of a property include:

the presence of isolated rooms facing different sides of the house;
kitchen from 9 sq. m.;
separate bathroom;
glazed balcony.

The quality of repairs in housing, the degree of improvement of the entrance and courtyard areas are also taken into account.

How much does a property valuation cost?

The cost of appraiser services is determined on an individual basis. When signing a contract with an appraiser, you should not ask him to name the price for services in advance. He won't be able to do this.

It will take time to analyze the object according to a wide list of criteria, which determine the final price.

Basically, the cost of an appraiser’s services is related to the availability of a number of documents, deadlines and scope of work. The price of a specialist’s services is not related to the cost of the object in any way.

Features of the assessment procedure

Real estate valuation is carried out quite quickly. At the first stage, a contract for the provision of services is concluded. The customer provides the contractor with documents (copies of state registration certificates, technical passports, equity participation agreements, copies of passports, etc.).

The appraiser personally examines the object, comparing it according to many parameters, takes photographs, which are then filed with the report as justification for the conclusion.

A report for apartments is written within 1-3 days, for houses - up to 5 days. An express assessment service is offered. If you pay for urgency (twice as much), the report will be ready in 24 hours.

The report will indicate the market and liquidation value. The last value is important for banks. At this price, the property can be sold in a forced sale format in the shortest possible time. This amount is 10-20% below the market.

When writing a report, the expert is guided by Federal standards, rules established by the Agency for Housing Mortgage Lending, and the individual requirements of the bank.

As a rule, when assessing real estate with a mortgage, the lender always double-checks the contents and form of the document, and the report is often sent for revision.

If the report is not accepted for objective reasons, the appraiser is obliged to make the required corrections without payment. However, it would be useful to stipulate this condition at the stage of signing the agreement.

Upon receipt of the report, the bank adjusts the loan amount in accordance with the market value of the housing purchased with a mortgage.

The results of an independent assessment will help you agree on a discount, but you should not count on the bank to provide a loan for an amount higher than the appraised value. This is too much of a risk for both the lender and the borrower.

Terms and cost of appraising an apartment for a mortgage

The cost of the appraisal is considerable and usually falls on the shoulders of the future borrower

The client can submit an application online through the website of the appraisal company and agree on an examination for a specific date and time. Specialists usually arrive within 1-2 days, and up to 5 days are needed to draw up a report.

Prices are different everywhere and are determined by organizations independently. On average, people have to spend 5,000-7,000 rubles. If the housing is located far from the city, the fee will be higher.

Real estate valuation for inheritance

Determining the value of real estate upon inheritance is necessary in order to correctly calculate the amount of state duty to pay for notary services. Its actual price depends on the cost of the object.

The market value of the object transferred by inheritance is taken into account.

If the assessment is not carried out, the property cannot be transferred to the heir. Registration authorities and notaries do not legalize the transfer of property rights without this procedure. It is very important to complete the assessment on time and to enlist competent specialists in this field.

The state fee is the only mandatory payment charged for the performance of procedural actions by a notary. The amount of payment is established at the legislative level by calculating a percentage of the assessment amount. Therefore, the amount of the duty is interconnected with the assessment of the object.

The main rule for valuing an object inherited is to determine the current value at the time of the death of the testator. Therefore, it is important to carry out the procedure as quickly as possible.

If several objects are inherited, the assessment is carried out separately for each.

The value of the property indicated in the assessment will serve as the basis for dividing the inheritance between legal successors, if there are several of them and their shares have not been determined in advance.

In 2020, property assessments made by independent experts often began to be challenged. If the heir believes that the cadastral value is not equivalent to the market value, he can contact a commercial company to determine the real value of the object.