Once you start working with the bank to finance the purchase, renovation or construction of a property with a mortgage loan, one of the steps in the approval process will be to estimate the price of the property. A mortgage loan is always secured by a specific property. This is because the bank puts a lien on the apartment, house or land to secure it in case the client fails to make the agreed monthly mortgage payments for a long time. The valuation of the property serves as the basis for the approval of the mortgage loan. The value of the property is determined either by the bank’s appraisers or by contract appraisers working with the bank.
TIP: The interest rate offered is not the only important parameter of a mortgage? You can get a comparison of important mortgage parameters from individual banks online at hyponamiru.cz
Choosing an appraiser
You don’t have to worry about choosing an appraiser. Each bank cooperates with several dozen appraisers throughout the Czech Republic and when arranging a mortgage, they will either assign one to you directly or provide you with a list of appraisers from which you can choose. If you arrange a mortgage on hyponamiru.cz, we will select an experienced appraiser for you.
If for some reason you have already had an appraisal done, check with a mortgage specialist to see if the bank will accept the appraisal. The bank will usually accept an appraisal that is less than six months old (note: banks accept original appraisals up to five years old on average for refinancing) and was prepared by an appraiser who works with the bank.
How is the property appraisal done?
A property valuation is one of the conditions for mortgage approval and is always prepared after the initial bank scoring of the prospective borrower. At the outset, you will arrange with a specific appraiser to arrange a time to view the property being appraised. If the inspection of the apartment, house or land is arranged by, for example, a real estate agent or a person other than the mortgage applicant, you will give the mortgage specialist the necessary contact information. The property inspection itself will take approximately one hour. To ensure a smooth inspection, prepare all documentation for the property in advance. The appraiser will measure the entire property, inspect and photograph the interior and exterior of the structure. He will be interested in all rooms, including basements, attics and balconies. Of course, he will not omit the land belonging to the property. Also be prepared for any questions you may have.
What information is the appraiser interested in?
- Age of the property (apartment, house)
- Year and extent of reconstruction
- Property defects (e.g. damp, mould, cracked brickwork)
- Building materials used (e.g. burnt brick, unburnt brick, concrete panels)
- Number and size of rooms
- Heating method
- Connection to utilities (electricity, water, gas, sewerage, internet connection)
- Orientation to cardinal points
- Current lease relations and easements
- House accessories (e.g. well, detached garage, woodshed and other outbuildings)
After visiting the property, the appraiser has some time to process all the information. The lead time varies depending on the appraiser’s current workload and the size of the property, but usually does not exceed one week. The appraiser submits the completed appraisal of the property to the bank. The mortgage specialist will communicate the result of the appraisal to you.
Online property price estimation
Today, most banks are able to make an estimate online. In this case, the appraiser does not come in person for a visit, but makes an estimate so to speak from the table based on the provided documents. The online appraisal is based on, for example, current photos of the property, the square footage and a basic description of the property. This type of appraisal is usually free or costs a few hundred crowns. The disadvantage can be that the resulting prices tend to be more conservative, as there is no human factor involved in the estimate in the form of an appraiser looking at the property in detail.
What value is the property valued at?
When determining the price of a property, it depends on how you use the mortgage. Generally, there are three types of pricing that can be encountered when valuing a property. If you will be using a mortgage to finance the purchase of an existing property, the valuer will determine the market price (sometimes referred to as the current price), which reflects the current value of the property in its existing condition. In the case of renovations and constructions, the future price is used, which takes into account the appreciation of the property after the completion of the construction project.
You can also meet the minimum price. This is used for large-scale renovations where the value of the property will drop to its minimum at some point. A typical example of this is when the builder takes the roof off of a renovated house. By the time a new roof is put on, the house is an unroofed torso whose value is reduced from the market price to the minimum price. This price then affects the various stages of the mortgage.
Property valuation methods
There are several methods of valuing real estate. The most common is the so-called comparative method, where the appraiser compares the calculated price of the property with the prices of comparable properties in the area. The income method is most often used for future leases, so that the bank knows how much of the future rent to include in the client’s income. An appraiser must always comment on the future rental value, the relevance of its amount and its sustainability in the future.
Necessary documentation for the property appraisal
You will need to provide the current title deed and the title of acquisition for the appraisal. You can obtain an extract of the title deed for an administrative fee either directly at the cadastral office or at Czech Post offices with Czech POINT. If you arrange a mortgage through hyponamiru.cz, we will take care of these documents for you. The bank or real estate agency can also request the title deed for you. However, it is better to inquire about this in advance.
Title deed means a contract that proves who owns the property and how it was acquired. This may be, for example, a contract of sale, a contract of inheritance, a contract for the transfer of a condominium unit.
What all affects the value of a property
Location: the price of a property is clearly influenced by the specific location. The price will definitely differ between two identical 1+1 apartments, one of which is situated in the centre of Prague and the other in a small village far outside the capital. The price of the property is also influenced by the amenities (school, kindergarten, post office, doctor, shops, etc.) and transport accessibility of the location.
Technical condition of the property: the condition and age of the building (year of approval) has a significant impact on the price. An old but newly renovated house or apartment with plastic windows, new ceilings or floors will definitely have a higher price than a property before renovation. Keep in mind, however, that the furnishings of the property, such as a luxury sofa, do not affect the estimate. It is not part of the property.
Size of the property: in the case of an apartment, the floor, the layout, the orientation of the windows to the cardinal points (even the method of shading – whether it is conventional blinds and shutters or electric outdoor blinds with a machine, etc.), the presence of a garden pergola, terrace or balcony, or even the possibility of using the basement, attic or garden.
The price of a property is also influenced by the demand for housing in a given location and the likelihood of further construction. If, for example, the last family houses remain in a popular urban area or village and at the same time the current zoning plan does not foresee further construction, their estimated price will go up.
Information about the marketability of the property is also important to the appraiser. The appraiser tries to find out how many people would buy the property. This factor can reduce prices for very expensive or oversized properties, for example. Here the selling power decreases. Therefore, paradoxically, a smaller 2+1 apartment, which is generally in high demand, may be of comparable value to a 4+1 apartment in a similar location, but where the sales force is lower.
What all lowers the price of the property?
A number of factors can also reduce the value of a property. Again, we can start with location. The price will certainly be lower if the property is, for example, in a socially excluded locality, near factories, in a flood area or in a place with almost no amenities and poor transport accessibility
The presence of radon and other chemical elements in the water or soil (note for houses) also has a negative effect. In the case of an apartment, the location of the dwelling unit in the house also plays a role. If you sell an apartment that has all the windows facing a busy street, the appraisal will be lower than for an apartment that has windows facing a quiet courtyard, for example. A higher floor is also valued better than a ground floor apartment.
The market price and the appraisal price usually coincide
In 90 to 95 percent of cases, the purchase price matches the appraisal price. This good result of price estimation accuracy is ensured mainly by real estate agencies, which are able to set the purchase price very accurately compared to self-sellers. In the rest of the cases, it may happen that the estimate of the property price does not work out as optimal, i.e. the purchase price is higher than the estimate price. It rarely happens that the appraisal price exceeds the purchase price. The appraiser would have to properly justify this fact in the appraisal.
How long does it take to value a property
It always depends on when the estimates are made. Generally, estimates take longer before Christmas or during holidays and vacations. In an optimal situation, it will not take more than 14 days to process a property appraisal. With a quick consultation with an appraiser, an appraisal can be obtained in as little as a week.
Price for appraiser services
The price for an estimate usually differs for flats and houses. However, there are banks that provide free estimates for a long time, regardless of the type of property, or announce limited-time promotions for free estimates. In this case, the bank pays for the property appraisal. Generally, home appraisals tend to be cheaper, with a few exceptions. In the case of an apartment, it may cost you 3.5 to 4 thousand crowns.
As for the estimates for family houses, they range from CZK 4.5 to 5 thousand. The price depends on how much time and work it takes to prepare the estimate. The more title deeds or plots of land belonging to the property, the higher the price of the estimate will be. Ask the appraiser about the approximate price of the appraisal in advance to avoid any inconvenience.
Estimates are also carried out during reconstruction or construction, where so-called construction surveys are required. The bank verifies, on the basis of the estimate, whether all the money provided has actually been spent. This is a substitute for supporting invoices. The inspection always precedes the next drawdown of the mortgage loan and you will currently pay around CZK 1,500 for it.
