An appraiser is a person in the profession of estimating the value of a property using knowledge, experience and skills of real estate valuation.
In the Singapore real estate market, they are mostly hired via appointment by lenders or authorities to help value a property so that a credible loan to value can be determined.
Banks usually work with an appointed panel of valuers to help with valuation works.
In the early stages of home loan application, lenders would request for an indicative valuation of a property so that they can underwrite the necessary loan documents with a correct property value and LTV. These valuation will then be verified and endorsed with a physical inspection when closing approaches.
It must be said that indicative value often mirrors the final estimated value, especially when a borrower is borrowing maximum loan to value.
This is because a deviation from the indicative value in which the loan was assessed and approved for would result in all the previous underwriting work to go to waste.
In addition, a home buyer could face financial issues with financing as he might no longer be able to obtain sufficient financing to purchase the property.
This is because a lower final value compared to the indicative value would mean that the shortage of funds would have to be sourced by the home buyer from other channels.
For example, a property with an indicative value of $500,000 with a loan to value of 80% would result in a $400,000 loan. Should the final value be determined to be $450,000, then the loan amount would be reduced to $360,000. Meaning the buyer would have to top up the $40,000 shortage required to close with cash.
This is because the approval of refinancing and equity loans depend very much one value of the property in question at the point of application of such credit facilities.
The higher a property is valued, the easier it would be to obtain refinancing and the higher the loan quantum with equity loans.
A property that has depreciated in value would seldom be able to obtain equity loans unless it only has a low principal balance remaining on the existing loan.
A appraisal fee is charged by appraisers which is usually paid for by the bank… which would eventually be paid by the borrower one way or another, directly or indirectly.
Some appraisers work for appraisal management companies which serve as intermediaries between appraisers and lenders.
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