Property appraisal by the bank

But why should the purchase price be equal to the value. It previously cost 135000 euros, only through negotiations would we get it for 123000. How is one supposed to recognize the value from the price and why should the banks conduct their own valuation if, as you said, the value is the purchase price.

First of all, about the value of a property: The value is relative and is of course reflected in the price. If the house had a value of TEUR 135, why then are there no buyers? If I were the seller, I would of course sell the house to the highest bidder. That is you and you are offering "only" TEUR 123. If you want to sell something yourselves, for example through an ad in the newspaper, you also put a few euros more on the price tag than you actually expect. A potential buyer then negotiates you down and both are happy: The buyer because he thinks he got a bargain and you because you got your desired price. It is no different when buying a house.

Now to the bank's valuation: One must first distinguish between market value = value at the current point in time and lending value = sustainable value of the property. The market value is clear but can change drastically next year. For example, if a highway is built directly next to the property or you suddenly find yourself in the new flight path of the nearest airport, the market value plummets. But if, for example, a great new housing estate is built and shops settle in and perhaps a kindergarten is built, the value can increase significantly. So these are always snapshots.

The bank mainly looks at the lending value since it provides you with a long-term loan. Therefore, the bank also wants to know what the sustainable value of the property is. A rule of thumb is: market value minus 10%. The lending value is ALWAYS below the market value, solely for safety reasons. The offered financing and associated conditions usually refer to the lending value or the loan-to-lending value ratio.

Hi,
Basically: The financial value of something is what you can get for it if you want/need to sell it. Not in 5 years, but now. You can put whatever price you want on the price tag, but if you can't sell it for that, it doesn't count. In other words, the negotiated price belongs in the category 'desired value.'
Now, unfortunately, the purchase price is also not the financial value – because if you have to sell immediately, you usually don't get that value either. Either you paid too much when buying (poor negotiation?), or overlooked serious defects that further decrease the value, or something similar. Plus the problem: those who have to sell usually get less than those who could postpone the sale by a few more years. If the financing fails, however, you are forced to find a financial solution, and what you then get or can get is what the bank can actually accept as the value.

Regards
I.

Hello,

I am curious whether you will receive your desired loan. As many have already written before, the value of the property is initially the purchase price. This is also the basis for determining conditions (loan-to-value assessment). Of course, a bank also conducts an internal valuation, but it will always be between 5-15% below the purchase price. However, this should not bother you, and you will never find out.

Personally, I do not believe you will receive the amount at the favorable conditions. More likely, you will be offered 100% of the purchase price and the rest as a small loan.

Do you even have equity? Or is everything just on credit?

I could also imagine that the bank finances the house at the usual interest rates and the remaining requests have to be covered by a separate loan. However, the interest rates here will generally be higher than for the house purchase.. I'm curious, the amount is not huge but apparently you have no equity?? What do you earn, because even with this amount a certain repayment should be achieved.

So our idea of buying a house didn’t come just from one day to the next. It goes back two years already. Unfortunately, we have no equity because we could never save anything due to not so good earnings (which is understandable in Mecklenburg). We are also only 22 and 25 years old. Now, for almost a year, we both have good jobs in the same place of residence with a good income. Overall about €2700. We do have a building savings contract but not much has been paid in, so you can’t really say that it can be used as equity. We can afford a monthly installment of max. €900. The lady from the bank told us that with a fixed interest rate period of 10 years and a loan amount of €150,000 we would be just under €600. I read something on the internet about a loan-to-value ratio of 120% that some banks do, but the interest rates rise because of that… If it’s not possible otherwise, we would have to take out a normal loan. It’s not so great but well… I am first of all curious what the bank will say later, I am still missing the pictures, the measurements of the house and the entry in the land register. But the sellers have a gentleman who does everything and will get in touch with me.