For individuals planning to purchase a home through a mortgage loan, the process does not end with choosing a bank. One of the next and most critical stages is the property valuation for the mortgage loan. This stage directly determines the loan amount, its terms, and even whether the loan will be approved.
If the property valuation is not carried out correctly, it may create both financial and legal risks.
What Is Property Valuation and Why Is It Conducted?
Property valuation is the process of determining the real market value of real estate under current market conditions. During mortgage lending, this process serves as one of the main mechanisms for minimizing the bank’s risks.
Main purposes of valuation:
- Ensuring the loan is issued with secure collateral
- Accurately assessing the borrower’s repayment capacity
- Preventing artificial inflation of the property’s market value
For the bank, the decisive figure is not the sale price but the value stated in the valuation report.
How Does the Bank Determine the Loan Amount?
In most cases, banks provide mortgage loans covering approximately 70–80% of the property’s market value. Therefore, the valuation result may differ from your initial expectations.
Example:
- Sale price of the apartment: 75,000 AZN
- Required down payment: 25%
- Expected loan amount: 56,250 AZN
However, if the valuation company determines the market value as 68,000 AZN, the bank will approve a maximum loan of:
51,000 AZN (68,000 × 75%)
This difference may require the borrower to provide additional funds.
Who Conducts the Valuation?
Property valuation for mortgage purposes may be conducted by:
- The bank’s internal valuation specialists
- Licensed and independent valuation companies
Who chooses the valuation company?
As a borrower:
- You are free to choose the valuation company
- The bank may only recommend, not impose, a specific company
If the mortgage is processed through the Azerbaijan Mortgage and Credit Guarantee Fund (AMCGF), the valuation is carried out by market participants recognized by the Fund.
Legal Aspects to Consider
Key legal points:
- The official status of the valuation report
- Accreditation of the valuation company
- The right to challenge the valuation result
- Risks related to the amount stated in the sale contract
Legal oversights at the valuation stage may later lead to:
- Loan cancellation
- Contractual disputes
- Additional financial losses
Property valuation for a mortgage loan is not a mere formality. It determines the actual loan amount, your financial burden, and your legal security. Proper valuation and legal oversight are essential for a smooth and risk-free mortgage process.
📞 Contact us for professional legal support
To receive legal advice on real estate and mortgage law and to benefit from our valuation services, contact us today.
We protect your rights and manage the process safely on your behalf.
