Housing and you: Valuation of your land for mortgages, insurance purposes
By Leonard Gildarie
Last week, we spoke of little things that can be done to raise the value of your home without going overboard on the costs.
It is a fact that many persons build their homes never intending to move out. However, it does not hurt to consistently upgrade, whether it is for your comfort or for the sake of raising the value. On the latter point, I believe that one can never know if the need will arise to sell that property.
More than likely, if it is being bought by someone, a bank may be involved and a valuation of that property to determine its market worth will have to be done.
Banks would use that as a guide to understand whether a mortgage, regardless of whether the applicant has the ability to pay, is worth the risk.
In Guyana, the commercial banks are mandated to use to government Valuation Officer to conduct these assessments. In the case of the New Building Society, however, they have their arrangements and are not bound to use these Valuation Officers.
If you are houselot owner, the banks will ask you to get a valuation on the land and on the proposed structure.
Now, I was puzzled. I used NBS so there was not this hassle. But the other banks require this valuation. If you were allocated a $100,000 houselot, chances are it is worth much more, taking into account that government has expended thousands of dollars more to develop roads, lights, water and other infrastructure. So it is worth much more. The bank needs to know how much.
Then, more importantly, the bank wants to know whether the plan you would have for the home is worth the money you said it will eventually be.
It is the job of the Valuation Officer to prepare a report outlining this current market value of the land and property, and together, they tell the bank what it will be exposed to if it lends, or how much it can lend.
But that covers the aspect of you wanting to build and borrowing from the commercial banks.
What happens if you are buying an existing property and wants a mortgage from a commercial bank?
The same principle applies. The Valuation Officer, located at the Ministry of Finance building on Camp Street, will have to value that home or property. Factors of the area, site location and structure will all determine the value.
In terms of the area, obviously this is critical. A property at Mon Repos may very well be worth less than one in Bel Air. That is location. In other words, the neighbourhood is a key factor in sending the price upwards.
Then the site location also plays a critical role. Whether it is a corner lot, middle lot, or a lot that has extra space because of how it was surveyed, all matters. If it is nearer to the main road or on the main road, it is significant also.
There we come to the actual structure. The size, shape, style and uniqueness are all taken into account. Whether there is a Jacuzzi bath, louvre windows, tiled floors, water tanks, paved yard or a concrete fence, will also come under consideration.
I was informed that the fee for using a Valuation Officer and receiving a report, should not pass $5,000.
Then valuation is also done for insurance purposes, for the obvious reasons. No insurance company that is self-respecting would want to provide coverage unless it is assured of the value of that property. The time for receiving a valuation should not beyond a week or 10 days.
For me, this was a new one. But valuations are a necessary evil, like taxes. Forgive me, my friends down at the Valuation Office…it is just a stated opinion.
Hope you all have a good weekend.
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