How to evaluate an apartment yourself

What is an assessment and why is it needed?

An appraisal is a way to figure out how much a particular property can objectively be sold for. The assessment is given by an independent expert.

Banks ask the buyer to evaluate an apartment or apartment before signing a mortgage agreement - this is a mandatory requirement of the law. For a bank, an appraisal is a way to make sure that it can recoup the money it lent to the buyer.

Example

The buyer asks the bank for a loan of 2 million rubles. into a mortgage, and he himself contributes 1 million rubles. personal savings. The appraisal of the apartment shows that the market value of the apartment being purchased is 2.5 million rubles. The bank understands that if a person cannot pay the mortgage, he will be able to take the apartment and quickly sell it at auction, returning 2 million rubles.

Who should conduct the assessment?

The law requires only one thing from an assessment - it must comply with the law on assessment activities.

The assessment is carried out by experts who have permission to do so. The report formatting rules must be followed - pages are numbered, the basis for the assessment, an accurate description of the object and other requirements are indicated. The activities of appraisers must be insured.

Banks typically recommend “accredited appraisers,” which are companies that the lending institution works with. But this is only a recommendation, and not an obligation - you can make an assessment at any company, even if it is not on the bank’s list of partners.

Publicity of assessment reports

In order to increase the openness of information about transactions, the law on valuation activities obliges the customer to publish certain reports on the valuation on a special resource.

The Unified Federal Register of Information on the Facts of the Activities of Legal Entities (hereinafter referred to as the Register) publishes information from reporting documentation if the assessment was carried out within the framework of the requirements of the following laws:

• No. 208-FZ dated December 26, 1995 “On JSC”;
• No. 225-FZ of December 30, 1995 “On production sharing agreements”;
• No. 41-FZ of 05/08/1996 “On production cooperatives”;
• No. 14-FZ dated 02/08/1998 “On LLC”;
• No. 75-FZ dated 05/07/1998 “On Non-State Pension Funds”;
• No. 160-FZ of 07/09/1999 “On foreign investments in the Russian Federation”;
• No. 156-FZ of November 29, 2001 “On investment funds.”

Information from the Report and the document itself are placed in the Register no later than 10 days after its adoption in the following cases:

• in case of any alienation of objects belonging to the state or municipality;
• when transferring such objects for rent, collateral or trust management;
• upon assignment of debt obligations that are closely related to a state or municipal facility;
• when seizing property for the needs of the Russian Federation, a constituent entity of the Russian Federation or a municipal entity.

Who orders the assessment report

Estimation of the market value of real estate is a paid service. The law does not directly indicate who should pay it - the bank or the loan recipient. Therefore, credit institutions, as a rule, offer to pass the costs on to the buyer of the apartment - if you want to take out a mortgage, bring the necessary documents, including a report. Accordingly, you pay for them.

Banks usually require reports that are at least six months old.

The assessment report is a document of 30–50 sheets, bound and numbered, with the expert’s seal

How much does a property valuation cost for a mortgage?

It all depends on who is doing the assessment.
If the real estate appraisal was done by a bank, then this service is free for the borrower. In other cases, the cost of appraising an apartment for a mortgage is covered by the borrower. He also enters into an agreement with the appraisal company. The cost of an appraisal depends on the type of property (apartment, house, commercial or non-residential property), region, location of the settlement, size and location of the property itself, and additional services of the appraiser. For example, in Moscow, the assessment of apartments costs from 5,000 rubles, and residential buildings - from 10,000 rubles.

The cost of an apartment appraisal report for a mortgage may vary from one appraiser to another. Use the cost calculator on the company's website to estimate the price per report and compare how much a property appraisal for a mortgage costs from other companies, and check to see if the appraiser offers discounts.

How much does an independent apartment appraisal cost?

There is no legally established price list—prices are set by the companies themselves. The cost depends on the type of premises - apartment or commercial property. And:

• depending on the region - more expensive in the capital, cheaper in small towns;
• depending on the size of the property - the appraiser spends time photographing the apartment; accordingly, the assessment of a one-room apartment will be cheaper than the assessment of a three-room apartment;
• depending on the location of the housing - for traveling to a hard-to-reach microdistrict on the outskirts of the city, the appraiser will ask for an additional payment;
• depending on which bank you chose for your mortgage - credit institutions have their own requirements for the report form, appraisers know and comply with them so as not to waste time on rework.

For example, in Moscow, for a report on the assessment of a one-room apartment for Sberbank, they ask for 3.5–7 thousand rubles.

Description of assessment methods and calculations performed

FSO No. 3 defines the requirements for describing the methodology of the assessment and calculations. The rules boil down to the following points:

• the Report must describe in simple language, step by step, the process of determining the cost of an object, so that the customer and other persons can understand how the specialist arrived at the result obtained;
• when choosing a certain evaluation method (cost, comparative or profitable), the contractor must justify the reasons why he took it as a basis;
• The calculations are accompanied by their description and explanations, by which it is possible to verify the results obtained.

What happens if the real price of the apartment differs from that indicated in the report

The cost of the apartment in the report is the price for which, according to the expert, the bank will be able to quickly sell the apartment in the event of problems with payments. As a rule, it will differ slightly from the price for which you buy an apartment in reality.

It is important for the bank that the value stated in the appraisal be higher than the amount they are loaning you.

If the price in the report is less than the mortgage loan, the bank may refuse to issue a loan.

If the price in the report is greater than your debt, then there will be no problems; it is profitable for the bank to give a mortgage for such an apartment. After all, he is sure that in case of problems he will quickly sell the apartment and get his money back.

Example

You buy an apartment for 8 million rubles. Make a down payment of 2 million rubles and another 6 million rubles. ask the bank for a mortgage. In the assessment report, the expert indicates the market price of the apartment at 7 million rubles. It turns out that the price of the apartment is less than what you bought it for. But you are still asking for less money for the mortgage than indicated in the report - only 6 million rubles. Accordingly, the chance that the mortgage will be approved is high.

Or another example:

You buy an apartment for 8 million rubles, and ask for 7.5 million in mortgage debt. The appraiser found out that the market value of the apartment is 7 million rubles. The bank will most likely refuse your mortgage because you are asking for more money than the appraiser indicated in the report.

How to choose an appraisal company

Who does the apartment appraisal for a mortgage?

? This is done by specialized appraisal companies or individual entrepreneurs. Specialists must have a specialized education, be a member of the Russian Society of Appraisers and take out a professional activity insurance policy.

The cost of appraisal reports is on average the same; you will not find significant differences in price between different appraisal firms. The main selection factor will be the presence of accreditation with the creditor bank. You cannot order an apartment appraisal for a mortgage at the first office you come across; the bank will not accept such an appraisal report. You need to select an appraiser from the list presented on the credit institution’s website or ask the mortgage manager for current addresses.

Why are banks so strict about appraisal reports? As we said earlier, issuing a mortgage loan is a big risk for the lender. A large amount and a long payment period increase the likelihood of non-repayment. An overestimated collateral value in the appraisal report will result in the bank not getting its money back when selling the property. Therefore, he must be confident in the appraiser who calculated the price of the collateral.

Of the many companies operating on the market, only a small part become permanent partners of mortgage banks. They undergo strict selection and do their work conscientiously, because it is from lenders that they receive most of their clients. Any claim against the appraiser may serve as grounds for termination of accreditation, and this is extremely unprofitable for the company. Therefore, the bank is confident that the information contained in the report is true.

What to look for when choosing an appraiser:

1. Work experience in this field. Only a qualified specialist can correctly determine the value of real estate.
2. Availability of a liability insurance policy. If the appraiser's activities are found to be erroneous, the insurance company will compensate the client for the damage.
3. Reputation. Reviews of the appraiser’s work can be easily found on the Internet.
4. Cost of services. A price tag that is too low may indicate insufficient competence of a specialist who is trying to attract clients by any means. In-demand appraisers have no shortage of work.
5. The number of banks that trust this company. If it cooperates with such market giants as Sberbank, Rosselkhozbank or VTB, most likely the quality of services is at a high level.

Recommended article: Is it possible to terminate a mortgage agreement with a bank: grounds and features

Most banks give clients a list of appraisal companies whose reports they accept, so it’s difficult to fall for scammers. The client can only choose the appraiser closest to him and decide on the price of the service.

Important! The list of appraisal companies is advisory in nature.

However, if you decide to contact another company, be prepared for a long period of approval of the report with the bank. A mortgage transaction already takes a lot of time; there is simply no point in delaying it further at the expense of an unaccredited appraisal company.

What to do if the bank does not accept the report

If the bank does not want to accept a valuation report made by a third-party company, you need to understand why. Here are the most likely reasons:

• The report does not comply with the requirements of the law, the bank indicates a specific reason - the validity of this claim needs to be checked. Report what is happening to the appraiser; they usually sort out the problem quickly. Or invite another expert to help. If you contacted a company and they refused to admit mistakes or redo the report, contact Rospotrebnadzor.
• The bank does not accept the report because it is not from an accredited company. Or does not indicate the reason at all. You can send a complaint to the Central Bank, FAS and the prosecutor's office. A response should come from the departments within a month.

By law, the bank is required to accept valuation reports, prepared in accordance with the law, from any organization. But if he refuses, the process will drag on - proceedings will begin, and he will have to complain to the regulatory authorities.

As a result, your deal may fall through - it is unlikely that the seller will wait 1-2 months while you argue with the bank without guarantees of results.

Therefore, it is easier to compare several appraisers and, if the difference is not dramatic, contact one of those accredited by your bank. Appraisal prices are almost the same everywhere.

Real estate valuation methods

The assessment procedure is established by a resolution of the Ministry of Economic Development. Depending on the situation, there are three approaches.

Comparative method.

This approach is now used in most mortgage appraisal reports. The appraiser collects data on similar properties for sale, creates a conditional “average apartment” with an average price, and then begins to compare it with yours according to various parameters. For example, if your home is on the ground floor, then a small discount will be made from the “average price”.

A comparative assessment takes into account the condition of the apartment and house, the presence of social infrastructure, transport accessibility, and technical parameters of housing, for example, floor, living area.

Income method.

Used to evaluate real estate that is purchased to generate income. For example, when a businessman buys a complex of apartments to rent out.

Costly method.

This approach is rarely used for a mortgage appraisal report. More often, the method is used to evaluate private houses. The appraiser finds out how much the entire construction of a similar facility will cost at the market price.

Real estate valuation agreement

A contract is the only basis for the emergence of a certain kind of legal relationship between the customer and the contractor. A real estate valuation agreement is a mandatory condition, drawn up in writing and certified by a notary.

This document must contain the following information:

• grounds for conclusion;
• type of residential premises being assessed;
• the type of value that must be determined during the assessment;
• cost of services provided and method of payment;
• information on civil liability insurance of the performer.

In addition, the contract must contain detailed information about the contractor, including information about the availability of a license for this activity, its validity period and the name of the issuing authority.

As a rule, appraisal bureaus use a standard document form, which is understandable given the growing popularity of mortgage loans and the development of the real estate market .

However, thoughtlessly signing a contract is a common mistake of many customers. Remember, an agreement is the only tool for protecting your interests in court if the contractor did his work in bad faith or completely neglected it!

Real estate appraisal agreement, sample.

How to order an assessment

To evaluate an apartment, you need to follow the instructions:

• Select a suitable appraiser - independent or from the bank’s catalogue. Conclude an agreement with him to perform the assessment.
• Agree with the seller on a time when the appraiser can come to the property. Or transfer contacts to a specialist, they can agree on it themselves.
• Wait until the appraiser makes a report - if the apartment is standard, without alterations or features, then the assessment usually takes 1-3 business days. Deadlines must be specified in the contract.

After concluding the contract, the appraiser must come to the apartment or apartment, take photographs of the property and its features, for example, obvious damage, if any.

How an object is assessed

It’s easy to order an apartment assessment:

1. You will find out from the bank a list of accredited appraisers.
2. You sign an agreement. It is concluded not with an individual, an appraiser, who directly carries out the assessment, but with the appraisal company for which he works.

After concluding the contract, the appraiser goes to the site to inspect the property, collects and analyzes information. Taking into account the client’s task, he selects a valuation method, calculates the market price of the object and generates a valuation report.

Deadlines. If the property is typical, for example, an apartment in an apartment building, then the appraiser usually prepares a report within 1-2 days after receiving the order. If the object is complex, then preparation may take a week.

What should be in the report

After the assessment, the expert must hand over a report to you personally or directly to the bank - this is a multi-page document drawn up in accordance with the law. It must contain the appraiser's details, including a copy of his insurance policy, and apartment details - a detailed description of the property with a set price. In the report, the appraiser justifies the choice of valuation method and describes the process of determining the price.

Here's what else is included in the report:

• documents used by the appraiser, for example, a technical passport;
• photographs of real estate, from which you can assess the condition of the property;
• availability of redevelopments and approval documents, if any.

The report separately indicates the final value of the object in the opinion of the appraiser. The document is prepared in two formats - paper, signed and certified by seal, and electronic, usually in PDF.

The assessment report is valid for a limited time - a maximum of six months from the date of the report.

List of documents required for appraising an apartment

Documents for secondary housing:

• Customer's passport for concluding a contract;
• A document confirming ownership (certificate or extract from the Unified State Register of Real Estate);
• Documents providing the basis for the emergence of ownership rights (purchase and sale agreement, agreement of shared participation in construction, etc.);
• Technical passport of real estate from BTI;
• Cadastral passport or extract from the Unified State Register.

Documents for new buildings (obtaining a mortgage from a bank):

• Customer's passport for concluding a contract;
• Share participation agreement with all additional agreements and assignment agreements;
• An act or agreement of transfer of ownership of an apartment;
• Technical passport of real estate from BTI;
• Extract from the Unified State Register of Real Estate.

Briefly - how to make a valuation report for a mortgage agreement

It is better to order a report from an appraiser accredited by the bank - the credit institution trusts such experts and accepts documents without delay. It is not forbidden to contact other specialists, the main thing is that they have permission to do such work and in the end they issue a report drawn up in accordance with all the rules. Decide on the choice of a specialist - the average cost in Moscow is usually about 5,000 rubles.

1. Enter into an assessment agreement with him. It must indicate the maximum time frame for receiving the report. Usually no more than 7–10 days.
2. Agree with the real estate seller on a time to conduct an assessment - a specialist must visit the apartment and take photographs. This is necessary to assess the condition.
3. Wait for the report to be processed. An accredited appraiser can transfer the document directly to the bank.
4. When the manager checks the report for compliance with the law, you will be called and invited to sign a mortgage agreement.