Spanish banks hit the breaks hard
During the economic crisis, the problem surfaced in a painful way. The Spanish construction sector itself was hit and the Spanish banking system also suffered a severe blow. As a result, banks became much stricter where loans and mortgages were concerned. The Spanish banks hit the brakes hard. Many a home buyer was refused if he wanted to take out a mortgage for the purchase of a home.
The housing market on the rise and the banks want again
Now that the housing market has been on the rise for a few years and housing prices are rising, the banks in Spain are also changing their strict stance. The number of mortgages taken out, which reached an absolute low in 2013, has since risen.
Moreover, in the last six months they have increased by more than ten percent per month. The banks are once again looking to the future with confidence and would like to sell mortgages.
The history and the risks that can repeat themselves
In the first years of this century, when the construction boom was in full swing, property was sometimes valued up to thirty percent above its actual value. The appraisers were accused at the time of pushing up valuations and colluding with the banks that could sell more mortgages in this way.
Even now, in the last few months, the accusing fingers are moving in the direction of appraisers and banks.
Still be able to buy by unrealistic appraisal
Banks in Spain normally finance no more than seventy percent of the value at which a house is valued. In those cases, the customer must therefore pay the remaining thirty percent out of their own pocket, as well as all costs that come on top of the purchase price of a home. Many aspiring home buyers do not have such a piggy bank. The only way they can buy a home is to look for an appraiser who values the property to be purchased well above its actual value.
The bank then grants a mortgage of seventy percent of the boosted appraisal value. As a result, the amount of the loan that is provided comes close to the price that the seller asks for his home. And thanks to this whipped valuation, almost 100% of the required amount can be collected by the buyer.
In such a case, the buyer is satisfied, because he can buy his house. The branch manager of the bank is also satisfied, because he can sell a mortgage and the selling broker is satisfied, because he receives his commission on the sale.
What initially seems fine may become a problem later
With the valuation, it can make a big difference who has an interest in it and who therefore exerts pressure on the appraiser. The broker wants to sell houses, the buyer wants to buy and the bank manager has to sell a certain number of mortgages to achieve the target set by management. Whether or not the appraisal value is realistic is not a problem at all at that time. Only if the market starts to stagnate again, the bank and the buyer in particular would have a problem.
Umbrella organisation and the Spanish bank in denial
The largest umbrella appraisal organisations and also the Spanish Bank deny that there has been an artificial increase in appraisals and report that this only happened before the economic crisis. They point to market forces and say: "if there is a lot of demand, the value of a home will naturally increase." That demand is starting to pick up again after a few lean years and that would be the reason that properties are valued higher.
The Spanish Bank also reports that, after the property bubble before the crisis, there is more control over doubtful appraisals. Appraisers must now adhere to a series of independent rules and there are more inspections from above.
Appraisers who take their responsibility
Yet there are appraisers who see the threat of inflated appraisals returning and have even filed a complaint with the Spanish Bank. The entire sector is responsible for ensuring that the pre-crisis scenes do not repeat themselves and that no new real estate bubble is created.
Therefore, if you have a house in Spain valued, look carefully who has an interest in the valuation and whether the amount is real.