ᐅ Procedures Followed by Banks When Purchasing an Existing Property
Created on: 9 Mar 2020 11:38
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Pinkiponk
I hope this topic fits within the forum; if not, the thread can be closed quickly.
Some of you may already know that we are planning to sell our current house to finance our new home. I have recently received some information from potential buyers that I find difficult to evaluate, and I’m surprised that banks apparently have such a strong influence on the purchase of an existing property.
Supposedly, the bank wants…
…a calculation of the living/usable area
…a detailed floor plan with measurements of all levels, cross-section drawings
…a visit from a bank employee or an appraiser (I’m not sure which)
The calculation of the living/usable area and the detailed floor plans of all levels are not allowed to be done by ourselves; this must be done by a professional company.
…Furthermore, the bank of one interested party, without having seen the house or being informed about renovations/refurbishments, without any information on equipment or features, estimated our house to be worth “xyz” euros.
Are you familiar with this as well? This “interference” by the bank in the contract negotiations or the requirements for the seller to provide documents to the bank are completely new to me. I only know it this way (as is the case with my husband and me): you disclose your salaries, income, savings accounts, insurances, etc., and then you either get the loan or you don’t. When we bought our house, we informed the lending bank about our salaries, and that was it. Which house we bought, with which square meters and rooms, was never of interest to them.
Thanks in advance for your replies.
Some of you may already know that we are planning to sell our current house to finance our new home. I have recently received some information from potential buyers that I find difficult to evaluate, and I’m surprised that banks apparently have such a strong influence on the purchase of an existing property.
Supposedly, the bank wants…
…a calculation of the living/usable area
…a detailed floor plan with measurements of all levels, cross-section drawings
…a visit from a bank employee or an appraiser (I’m not sure which)
The calculation of the living/usable area and the detailed floor plans of all levels are not allowed to be done by ourselves; this must be done by a professional company.
…Furthermore, the bank of one interested party, without having seen the house or being informed about renovations/refurbishments, without any information on equipment or features, estimated our house to be worth “xyz” euros.
Are you familiar with this as well? This “interference” by the bank in the contract negotiations or the requirements for the seller to provide documents to the bank are completely new to me. I only know it this way (as is the case with my husband and me): you disclose your salaries, income, savings accounts, insurances, etc., and then you either get the loan or you don’t. When we bought our house, we informed the lending bank about our salaries, and that was it. Which house we bought, with which square meters and rooms, was never of interest to them.
Thanks in advance for your replies.
In Germany, there are laws and regulations for almost everything. This is probably about the Regulation on the Determination of Lending Values of Properties according to § 16 paragraphs 1 and 2 of the Pfandbrief Act (Beleihungswertermittlungsverordnung - BelWertV), so it might be worth taking a look there, for example, appraisals in § 5 in conjunction with § 24 BelWertV.
Pinkiponk schrieb:
The lending value is usually much lower than the market value, or is that incorrect? Additionally, the bank uses this value to determine how much money a seller can ask for their existing property without having ever seen it, right?That is correct. The lending value is intended to reflect the value that can be achieved over the long term without being affected by economic fluctuations. Furthermore, banks (depending on their type) will typically lend only up to 60% or 80% of this determined lending value.
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Reini123414 Mar 2020 21:53I am a bank clerk working in loan processing, so property valuation is part of my daily routine.
The requested documents are all standard; without them, it is not possible to determine the lending value. This value is always below the market value because it is calculated with a long-term perspective. In certain areas, such as Munich, multipliers are still used due to the specific market situation.
We operate in a very rural area, and we do not conduct interior inspections, even though the new lending value guidelines require them. For the purchase of existing properties, we apply a safety discount of 10% off the purchase price and then use 80% of that value. The purchase price itself must also be checked for plausibility.
However, the bank does not get involved in negotiations. The customer presents a purchase price, and the bank assesses whether the customer can afford it and if sufficient collateral is available. Then there is either a “yes” or “no.” The bank does not approach the seller to negotiate the price or anything similar. The customer obtains a financing confirmation, then goes to the notary, who takes care of the rest.
I can only speak for our small rural bank. The process at large institutions in the city is probably different.
The requested documents are all standard; without them, it is not possible to determine the lending value. This value is always below the market value because it is calculated with a long-term perspective. In certain areas, such as Munich, multipliers are still used due to the specific market situation.
We operate in a very rural area, and we do not conduct interior inspections, even though the new lending value guidelines require them. For the purchase of existing properties, we apply a safety discount of 10% off the purchase price and then use 80% of that value. The purchase price itself must also be checked for plausibility.
However, the bank does not get involved in negotiations. The customer presents a purchase price, and the bank assesses whether the customer can afford it and if sufficient collateral is available. Then there is either a “yes” or “no.” The bank does not approach the seller to negotiate the price or anything similar. The customer obtains a financing confirmation, then goes to the notary, who takes care of the rest.
I can only speak for our small rural bank. The process at large institutions in the city is probably different.
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nordanney15 Mar 2020 18:01Reini1234 schrieb:
However, I can only speak for our small rural bank. Things are probably different at the big institutions in the city. Basically, it’s no different at the large banks either. This also applies to direct banks.