What is the impact of evaluating a property?

Need help with issues related to hiring a home loan? Why not turn to a credit intermediary who will take care of everything for you, facilitating the conditions you will have access to? The service of Poupança no Minuto is quick and free. But first understand how the evaluation of a property works.

How does the evaluation of a property work?  

The evaluation of a property aims to reach the real value of a property for the establishment of a housing credit. This is so that the bank understands how much the property is worth and, consequently, the loan to be granted. The evaluation of a property will have a direct impact on the down payment amount for the credit.

Thus, it can be done in two situations: when you are going to contract a new housing credit, or when you are going to transfer your housing credit to another bank. This is because if the property was purchased years ago, the appraisal value will be different from the initial one.

But how is the assessment carried out and what factors influence it? The property is assessed by a specialist, at the cost of the property buyer through the evaluation commission charged by banks. As a rule, it is the banks that hire the specialist assessors, but as a consumer, you can also have an independent assessment done to have an idea of the estimated value of the property.

You can hire a property assessment through four types of evaluators.

• Companies or specialized technicians with their own businesses;  
• Free real estate evaluation websites.
• Geographic area appraisers provided by the Finance Portal.
• Services of independent real estate appraisal not tied to banks.

As a consumer, you should also have access to the assessment report and not just your bank. This is a recommendation from the Bank of Portugal so you are not deceived.

What parameters influence the evaluation value?  

The value of a property appraisal depends on certain factors that are analyzed in housing. Such as:  

• The location, floor, view, solar orientation, and accessibility.
• Quality of construction;  
• Construction date;
• State of conservation;  
• Land on which it is located
• Type and layout;  
• Finishes
• Furniture and/or available equipment.
• Parking, pool, elevator, surrounding spaces, among other facilities;  
• Current market.

The higher and better these parameters, the higher the value at which the housing is evaluated. And the higher the appraisal value, the more advantageous the consumer who will contract the housing credit will be.

This is because it can impact the final financial conditions, such as the spread assigned by the final loan-to-value, the financing term, and the amount that will be paid as an entry for credit, as we will see next.

What impact can the property evaluation have on the down payment value?  

This is a factor that customers often overlook. However, it is essential to understand that the property evaluation can significantly alter the amount you have to give as an initial down payment in equity, and why. This factor can influence positively or negatively.

So let's see... In a home loan, currently, the bank finances up to 90% of the property value, if it is intended for own and permanent housing, and 80% of the property if it is intended for a secondary residence. But there is an important factor here: The bank lends the percentage corresponding to the lower value of the property, between acquisition or evaluation.

With an example, it might be easier. If you acquire a property for 285,000 euros, that is the acquisition value. But if later the property is appraised at a value of 270,000 euros, that is the appraisal value.

And what is the impact of the acquisition value being different from the appraisal value? For example, if initially the bank proposes to lend you 90% of the value, the simulation you did was based on the acquisition value. In other words, you needed to have €28,500 in equity available (10% of €285,000). But if after that, the property was appraised at €270,000, the bank will only lend 90% of this lower value. However, the acquisition value that you have to pay to the owner remains the same.

So, if the bank only lends, as a final proposal, 90% of 270,000 euros, that is, 243,000 euros, you need to provide the missing amount to 285,000 euros, corresponding to 42,000 euros. Therefore, the appraisal value of a property can make all the difference in the initial cost of buying a house!

Because now imagine that the property was valued at the same or higher purchase value, the bank would consider the 285,000 euros for financing. And between giving 28,500 or 42,000 euros as a down payment, there is a difference of 13,500 euros on the table. A value that could cover the cost of taxes that still have to be settled in the purchase of a property.

In other words, it is important to be previously informed about these issues and to use a good property valuation service. The more specialized the service, the more detailed the valuation report will be and the more assurance you have that it is realistic.  

So, why not turn to market professionals who can help you secure the best services? Contact Poupança no Minuto to mediate your home loan, and make sure that nothing fails with what you had in mind. Or simulate financing directly here: