A valuation report for a loan is read by people who did not visit the property and may never see it. The credit officer, the sanctioning authority and, years later, perhaps a recovery officer all rely on the report to tell them what the bank holds as security. That is why a lender reads it in a particular order, and why the value is rarely the first thing they look at.
Identity before value
The first question is whether the property in the report is the property in the title deed. The report should give the survey, block or plot number, the boundaries on all four sides, and the land area as it appears in the deed and as it was found on site. Where the boundaries on the ground do not match the record, a careful report says so plainly rather than adopting the deed and moving on.
The approved plan against what stands
A lender can only rely on what can be legally sold. The report records the sanctioned plan, the built-up area actually constructed and any deviation from it: an additional floor, an enclosed balcony, a change of use. Construction outside the approval is usually shown separately and either valued at a discount or left out of the figure the bank relies on.
Three figures, not one
Most lending formats ask for more than one value:
- Fair market value, the price a willing buyer and a willing seller would agree in an ordinary sale.
- Realisable value, what the property can be expected to fetch when the bank actually has to sell it.
- Distress value, what it would fetch in a forced sale within a short period.
The guideline value used for stamp duty is often reported alongside, for reference. Each lender sets its own relationship between these figures; the report should state each one and the basis on which it was reached.
Method stated, evidence attached
The report should name the method used, whether comparable sales, cost or income, and explain why it suits the asset. Comparable evidence should carry dates and sources. Site photographs should be dated and, for most lenders now, geo-tagged, so the inspection can be verified without a second visit.
Signed by someone accountable
Finally, the report should identify the valuer, their registration, and the reference under which they are empanelled with the lender. A report is only as strong as the person prepared to stand behind it.
Documents worth having ready
Inspections move faster, and reports carry fewer caveats, when these are to hand:
- The title deed and the chain of documents before it
- The approved plan and the BU permission
- The latest property tax bill
- The 7/12 and 8A extracts, for land
- The society share certificate or NOC, where applicable
If you are preparing a property for a loan, tell us what the lender has asked for and we will tell you what the report will need.