What Is an Appraisal Report and Why Does It Matter?

An appraisal, officially a real estate valuation report, is a report in which a licensed valuation expert examines a property's market value and legal status. If you are using a mortgage, the bank requires this report; even without a mortgage, getting one is cheap insurance on a large purchase.

Who prepares the report?

Valuation reports are prepared by valuation experts licensed by the Capital Markets Board (SPK) and the licensed valuation firms they work for. Banks have firms they work with, but you can also request a report from a licensed firm yourself.

What does the report contain?

• A summary of the title deed record: owner, nature, annotations, declarations and liens.
• The zoning status and a comparison of the municipality-approved project with the structure as built.
• Building permit and occupancy permit information.
• The home's physical features: gross/net area, number of rooms, floor, building age, building layout.
• A comparison with similar properties: prices of comparable homes in the area and where this home stands against them.
• The assessed market value and any notes such as 'not suitable as loan collateral.'

Why does the reported value differ from the listing price?

The listing price is the seller's expectation; the appraisal report is a generally conservative estimate based on comparable sales. In fast-rising markets in particular, the reported value can come in below the listing price. Since the bank's loan amount is calculated from the reported value in that case, your down payment can end up larger.

What to watch for when reading the report

• Is there a note on deviation from the approved project (an enclosed balcony, an unauthorized floor, unpermitted renovation)?
• Does the property's registered nature on the deed match its actual use?
• Do the gross and net areas match what the seller stated?
• Are the comparables genuinely similar homes, or are they a different age and specification?