First-time property buyers and investors cannot afford to skip property valuations and appraisals. Valuations are detailed and formal reports with legal bearing while appraisals are informal valuations (usually by real estate agents) that focus more on a property’s list price.
Getting qualified, third-party professionals to view a property in person and determine its correct market value is imperative for minimizing investment risks. Appraisers and valuators visit a property in person to confirm its existence, condition, occupancy, and structural characteristics. They also check the surrounding neighborhood and other factors could affect its market value.
Both are useful for sellers, buyers, and lending institutions that will finance the purchase of the property. It is due diligence that will save the parties involved from losses due to erroneous pricing.
Differentiate Price from Worth
To succeed in real estate investing, people must understand that price differs from value. Sellers have the prerogative to name a price for a property. They are well within their rights to set a price above or below its market value. Qualified appraisers provide unbiased assessments on how much a property should be priced. Thus, they can help buyers find out if the property comes at a fair price.
Valuators, meanwhile, delve deeper into the background of a property to determine its real worth. They check everything, from title issues to risk ratings due to environmental hazards. Chartered surveyors like the professionals at Cavendish Maxwell are knowledgeable about regional markets and use international-standard benchmarks to come up with accurate valuations. They can give detailed answers on whether a property’s price matches its value.
Role of Mortgage and Refinancing Requirements
The services of appraisers and valuators also pave the way for getting a mortgage or refinancing — two things that can help buyers and sellers mitigate investment risks. With a mortgage, buyers can reduce their liquidity risk. With refinancing, owners can hold on to their properties for an extended period. They can use the time to assess the merits of upgrading and selling instead of holding on a piece of property.
Property valuation also reduces the risk for lenders. If it reveals that a property has a low value, banks can require buyers to pay for Lenders Mortgage Insurance.
By helping to determine a property’s market value and appraisal cost, appraisers and valuators leave little room for fraud. This, in a nutshell, is how these professionals mitigate real estate investment risks.