Do you want to buy real estate in Saudi Arabia? Real estate valuation is the step that determines the value of your real estate and opens the doors for you to obtain a finance loan. Real estate valuation determines the value of the bank loan and thus protects the interests of the parties involved in real estate transactions.

In this article, we will take a look at finance loans and how property valuation affects them.

What is a finance loan?

It is a residential mortgage financing program that provides the money for the process, whether when owning, or renovating real estate, it helps individuals in housing by requesting a finance loan and paying it back in monthly installments after providing several guarantees to obtain this loan. 

What is Real Estate Valuation?

Real estate valuation is the process of determining the market value of a property at a particular time according to several factors, and this is done by a real estate valuer accredited by the Saudi Authority for Certified Valuers the property is valued based on several factors, including:

• Location:

 it is important in the valuation, based on the proximity of the property to public services and facilities such as hospitals, schools, institutions, means of transport, as well as the nature of the surrounding environment

• The condition of the real estate:

Properties in good condition with regular maintenance have higher value due to quality construction, upkeep, facilities, and external appearance.

• The real estate market: 

Demand and offer in real estate are important, it is affected when the demand is high and the supply is low, which makes the value increase.

• The space of the real estate: 

it increases the value, in addition to the design of the real estate and its interior space.

• Economic conditions: 

they play a big role in valuation as the value decreases during economic crises

These are the most important factors of real estate valuation, and the following are the three methods by which any real estate valuation is carried out:

• The comparison method: 

The property is valued by comparing it to similar properties that have been recently sold in the same area, taking into account the characteristics of the property such as the area and the condition of the property

• The cost method: 

This is the calculation of the cost of building the real estate and the cost of the land, taking into account the condition of the real estate in terms of depreciation

• Income method:

 This is a method specific to commercial real estate where an estimate of the income that the real estate can generate in the future is calculated, and then the current value of this income is calculated

The real estate market in Saudi Arabia is developing significantly, so real estate valuation has been of great importance in many transactions. If you need to request a real estate valuation, you can contact Aain Real Estate Valuation Company and get an outstanding experience with a certified real estate valuer. 

How does a real estate appraisal affect a finance loan? 

There are many purposes of a property valuation, the most common of which is to request a real estate valuation when making a finance loan, this is an essential step when applying for a finance loan  and its importance is as follows: 

• Determining the value of the loan:

The bank determines the value of the loan based on the value of the real estate, so the real estate valuation is important when applying for a finance loan  

• Financial risk: 

The loan value must match the real estate value to assess financial risk, allowing the bank to sell the property if the borrower fails to repay.

• Follow the laws:

Some financial laws and regulations govern the valuation process, it helps ensure that the bank complies with these regulations and avoids future legal issues.

• Protecting clients:

 It provides customers with assurance that they are not overpaying, and can help determine whether the terms of the loan are reasonable or not.

A property valuation is one of the most important steps in applying for a mortgage to protect your rights and identify financial risks. 

Don’t hesitate to request a real estate valuation through Aain Real Estate Valuation Company as it covers all parts of the Kingdom in addition to being accredited by the Saudi Authority for Valuation and Accreditation and holding a fellowship and accreditation certificate from the Royal Institute of Chartered Surveyors (RICS), contact us and get an accredited valuation service. 

Frequently Asked Questions:

• What is the Saudi bank’s interest rate in 2024?

The interest rate for this year is between 5.25% and 5.50%.

• What happens after the property valuation?

After completing the process, the real estate valuer prepares detailed reports explaining the information about the real estate and the methods used in the valuation, including a description of the real estate, analyzing the data, explaining the criteria and methodologies used, and providing recommendations and conclusions.

• What is the importance of a real estate loan? 

A property valuation is crucial when applying for a loan, as it helps determine the loan amount, prevent overpayment, protect your interests, set the interest rate, establish the required down payment, and assess loan approval chances.

• What is the finance loan deduction rate?

The maximum salary deduction for a finance loan  is 65%

Real estate valuation is your key to getting your dream home through a finance loan, to get the bank’s approval and to determine the value of the loan without overpaying you need a professional valuation.