July 16, 2024

Estimate An Apartment for A Real Estate Business: Why is it Needed?

7 min read
real estate business

In this manual, we will tell you what an estimate for an apartment for a real estate business is, in what cases it is needed, and how to understand the variety of estimator companies.

What is real estate valuation?

Real estate Estimation – determining the market, liquidation, or other value of real estate and creating an Estimating report – an official document confirming the liquidity of the property for the bank.

Why evaluate real estate?

Real estate valuation is one of the critical conditions for obtaining a real estate business. Without a document confirming the actual value of housing, no bank will issue a real estate business loan. As a rule, money is given against the security of the purchased property. Hence, real estate valuation plays an important role when the bank signs an agreement with a new client. The loan amount, as well as the interest rate, will depend on the appraised value of the home. A real estate estimate is also required to obtain a mortgage.

In turn, the buyer is interested in an additional independent assessment of the cost of the purchased property before signing a mortgage agreement. This is especially true when purchasing housing on the secondary market. In this case, the Estimate is needed to ensure the seller is not overcharging.

Also, a housing assessment may be needed to obtain permission from the guardianship and trusteeship authorities to buy or sell housing that belongs to minors or incompetent citizens.

What does the bank want to know?

The bank is interested in finding out the apartment’s market value purchased by the borrower since this property is a guarantor of debt repayment. Suppose the client needs help to fulfill his obligations. In that case, the bank will sell the mortgaged apartment at auction and return the entire debt. In this way, credit institutions reduce the risk of non-repayment of funds.

Where and how to order an assessment?

Real estate valuation is a particular field of activity. Only some organizations can carry out such work, but only one is listed in the SRO register; you can check the organization of the best electrical estimating services. At the same time, the specialist hired for the assessment must have a specialized higher education, at least one year of experience in the industry, and a valid certificate of liability insurance.

Typically, banks offer a ready-made list of licensed organizations that can conduct assessments. From them, you can choose the most suitable option.

What influences the Estimate of an apartment?

The cost of an apartment consists of a large number of factors. The most important are the essential housing characteristics, including area, number of rooms, floor, layout, decoration, the year the house was built, building materials, defects or lack thereof).

The location of the property plays an equally important role. In some cases, the cost of similar apartments may differ by tens of percent simply because one is in a more favorable location. The location in the city’s historical center or next to landscaped parks, public spaces, or areas with more developed social infrastructure increases the cost of housing.

The Estimate may also consider other unique characteristics of the property, such as panoramic views from the windows or the historical value of the building. Also, appraisers constantly analyze the general situation in the real estate investment and adjust the final figures depending on the average cost of similar housing.

Documents for Estimate an apartment

The list of documents for estimate an apartment depends on the type of housing being purchased. If you are planning to buy an apartment on the secondary market, the list will include:

  • passport;
  • technical passport for the apartment (floor plan, explication);
  • documents confirming ownership (extract from the Unified State Register, purchase and sale agreement);
  • act of acceptance and transfer of the apartment.

When purchasing housing in a new building, you also need an agreement for participation in shared construction (DDU).

This list may differ depending on the organization that will do the assessment. More accurate information should be clarified directly with the company.

How do you evaluate an apartment for a Business?

To evaluate an apartment, you need to complete the following steps:

Select an estimating company.

Typically, banks offer a ready-made list of licensed organizations that can conduct assessments. From them, you can choose the most suitable option.

Nevertheless, the estimating company must be listed in the register of self-regulatory appraiser organizations. The appraiser must have a specialized higher education, at least one year of experience in the industry, and a valid certificate of liability insurance;

Wait for the assessment results.

When the assessment is completed, the specialist will provide an assessment report in paper or electronic format.

The report preparation period is usually about 3 days;

Check the assessment report

The report must meet the requirements below, as well as the requirements of the bank.

What should be in the finished report?

After concluding a contract for the provision of services, an appraiser travels to the site to inspect the apartment. If necessary, he takes photographs of identified deficiencies. The result of the specialist’s work is an assessment report. This document includes information about the electrical estimation company, data from the estimating customer, information about the property, information about the market value, and a comparative analysis of proposals presented on the market, the market, and the liquidation value of the property.

Also, as a rule, copies of real estate documents and photographs of the apartment are attached to the report.

The validity period of the assessment report

The assessment report is valid for 6 months from the date of preparation.

How much does an assessment cost?

The cost of appraising an apartment depends on the region and the pricing policy of the specific organization that carries out the work. On average, we are talking about an amount from 2 to 6 thousand rubles.

Who pays for the assessment?

All work on real estate valuation is paid by the client. It is essential to consider that even if the bank refuses to apply for a real estate business, returning the funds spent on the assessment will not be possible.

The bank pays for the Estimate of the apartment only in particular situations, for example, during legal proceedings related to collecting debt on a real estate business loan.

What is salvage value?

Banks are often asked to indicate in the final report not only the market price of the apartment but also the liquidation value. This is the amount for which the bank can sell the apartment in a limited time. It is usually significantly lower than the market price.

Is it necessary to have an apartment appraised when refinancing a loan?

Yes, re-evaluation of the apartment is required when refinancing a real estate business. It is carried out even if the transaction is carried out within the same bank. Revaluation of the apartment may affect the terms of refinancing. 

For example, since the purchase, the condo has risen in price; this means that the value of the collateral also increases, and the bank will be able to offer a lower interest rate.

Possible problems and nuances

Selecting an appraiser. To avoid problems when appraising an apartment, you must contact a trusted organization with all the necessary documents (it is in the SRO register and has a liability insurance certificate). Suppose you still determine that you can select a suitable specialist. In that case, you can ask representatives of the bank where you plan to apply for a real estate business for help. Most credit institutions always offer potential clients a list of accredited appraisers.

Redevelopment. When buying an apartment in the secondary sector, you must carefully consider existing redevelopments, especially if they are not legalized. Under no circumstances should you agree to the appraiser’s proposals to “turn a blind eye” to discovered inconsistencies; the bank may go to court and declare the transaction invalid if this fact is revealed. Moreover, you may be accused of fraud with all the ensuing consequences.

The Estimate differs from the selling price. Suppose you purchase a secondary home with a real estate business. In that case, the estimate report may contain a lower cost than that requested by the seller. In this case, the bank will not approve a loan higher than the value indicated in the report. You can negotiate a discount with the owner or pay the difference from your funds.

What should I do if I disagree with the assessment of the apartment?

Suppose you first disagree with the price determined by an independent appraiser. In that case, you need to carefully study the report recompiled by him, in particular, check whether all the advantages of the appraised apartment are taken into account, as well as how relevant the real estate market analysis is. If you have any doubts, you can apply for a re-assessment from another organization.

In what other cases may a real estate valuation be needed?

A real estate estimate may be needed not only when applying for a real estate business but also in other cases:

  • purchase and sale of an apartment;
  • real estate insurance;
  • registration of inheritance;
  • legal proceedings.


To obtain the optimal result when estimating an apartment, it is recommended to consider several companies at once. Selection criteria should be the organization’s reputation, the timing of the assessment, and the price.

You can choose an electrical estimation company at your discretion, but to avoid delays with the bank, it is better to use the services of organizations accredited by it. In this case, you will additionally protect yourself from possible errors and save time.

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