THE VALUATION CORP. CONDUCTS MORTGAGE
VALUATIONS IN MOSCOW, RUSSIA, AND OTHER RUSSIAN REGIONS.
Valuation of real property for mortgage purposes has a number of specific characteristics. Pledge of real property called mortgage is regulated by the law on mortgage. When a real property is given in pledge, the borrower and the lender make a mortgage contract, which is subject to notarization. A mortgage contract must specify the property being mortgaged, its valuation, essence, size and the date of settlement of the obligation secured by the mortgage.
Independent appraisal of a mortgaged property helps to determine whether it would be feasible to use borrowings to finance real estate transactions. This feasibility can be considered both from the borrower’s and from the lender’s perspective. Use of debt to purchase real estate permits:
1. The borrower:
- to buy a property whose value can significantly exceed the borrower’s own capital;
- to increase the investment portfolio diversification by investing in other immovable properties or other investment
instruments using the capital released as a result of credit utilization;
- to purchase a real property on an installment plan, paying the amounts due to the lender from the income generated by
the property;
- to achieve a higher rate of return on equity by selecting favorable terms of financing and providing skilled management
of capital.
2. The lender:
- to control the loaned property throughout the debt repayment period;
- long physical and economic life of real property is the foundation supporting repayment of the principal and accrued
interest;
- compulsory state registration of the titles to immovable property and transactions therewith, including mortgage, serves as
a legal guarantee for the performance of contractual obligations by the borrower;
- a flexible loan agreement framework and the ability to include special conditions in the agreement permit the lender to timely
respond to the market rate of return or changes in the borrower’s financial stability, and to exert influence on resale
of the loaned asset prior to expiry of the debt repayment period;
- issue of a mortgage under the granted mortgage loans permits the bank to put mortgages in circulation and augment its credit
resources.
Since the borrower’s and lender’s interests to a certain extent contradict each other, the task of the independent appraiser valuing
the mortgaged property is to give an objective, unbiased judgment on the fair value of the property. When performing the valuation,
the appraiser should be first of all guided by the market conditions and the condition of the property itself.
Thus, an independent valuation of a property given in pledge is a necessary condition to guarantee the observance of both the borrower’s and the lender’s property interests.
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