Lately, more and more friends on the forum are looking at properties, and I’ve noticed a key question keeps coming up: what exactly is that bank appraisal done when applying for a mortgage? Does a higher appraisal value mean I can get a bigger loan? I just went through the mortgage process and learned a few things the hard way, so today I’m here to talk about this topic.
What is a Bank Appraisal
Simply put, a Tasación is a property valuation report issued by a professional, independent appraiser. When you apply for a mortgage, the bank will require this appraisal to understand the bank appraisal value or the ‘true’ value of the property, which helps them assess the risk of lending you money. It’s important to note that the appraiser is sent by an appraisal company designated by the bank. Although we, the buyers, pay for it, the report is for the bank, and its primary purpose is to protect the bank’s interests.
How the Appraisal Value Affects Your Mortgage
This is the most critical point! The bank will typically lend you 80% of the lower of two values: the purchase price or the bank appraisal value. For example, let’s say you’ve found a property and agreed on a price of €200,000 with the seller. After the bank appraisal, there are three possible scenarios:
- The appraisal value is €210,000: The bank will base the loan on the €200,000 purchase price, lending you 80%, which is €160,000.
- The appraisal value is €200,000: Similarly, the loan will be based on the €200,000 price, so you’ll get €160,000.
- The appraisal value is €180,000: This is bad news. The bank will base the loan on the €180,000 appraisal value, lending you 80%, which is only €144,000. This means you’ll need to come up with an extra €16,000 for the down payment!
So, a higher appraisal value isn’t necessarily better, but it absolutely must not be lower than your purchase price, or your financial pressure will increase instantly.
The appraisal process and cost are actually not complicated. After you and the bank have a preliminary mortgage agreement, the bank will contact an appraisal company. The appraiser will visit the property to inspect, take photos, measure it, and consider factors like location, property age, and market conditions. The report is usually ready in about a week. The cost generally ranges from €300 to €600, depending on the property type and size. For my 90-square-meter Piso, it cost me around €400.
| Factor | Approximate Cost Range |
|---|
| Property Type | A Chalet is usually more expensive than a Piso |
| Property Size | The larger the area, the higher the cost |
| Appraisal Company | Prices vary between companies |
| Location | City centers may be slightly more expensive |
Finally, a little tip: when signing the preliminary purchase agreement (contrato de arras), try to add a clause stating that if the final bank appraisal value is significantly lower than the purchase price, causing the mortgage application to fail, your deposit can be returned without penalty. Not all sellers will agree to this, but it’s always worth a try. I hope this information helps all the friends out there who are currently house-hunting! Have any of you encountered a big difference between the appraisal value and the purchase price? Feel free to leave a comment below to discuss and share how you handled it!
