Banks won’t approve your home loan application until the property has undergone a legal and technical check. We looked at how this exercise affected the buyer’s home loan application amount and status. Financial institutions use a variety of risk assessment methodologies to determine the creditworthiness of borrowers. For obvious reasons, this activity is rigorously completed in the event of lengthy, substantial mortgages, such as home loans.

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Banks do a number of inspections on the property up for sale in addition to evaluating the applicants’ own creditworthiness. Every effort is made to ensure that the bank is lending money to a secure property because this asset will serve as the security against the loan. Banks therefore conduct a technical and legal examination of the asset in exchange for the loan.

 

Legal and technical verification of property
Legal verification	Examination of all the original documents of the property, including the title deeds, no-objection certificates (NOCs) and other owner ship papers.
Technical verification	Examination of the physical condition, building specifications and market value of the property, to decide on the loan amount that can be offered.
Verification chargers	Typically, the bank will ask you to pay flat charges. This is general  in the range of Rs 5,000-10,000

 

What does property legal verification entail?

A property investment must be devoid of any legal complications in order to be rewarding. Purchasers who use housing finance receive additional assistance from the lender even though they independently verify the property’s legal status. All banks, housing finance companies (HFCs), and non-banking finance companies (NBFCs) typically send a team of experts to inspect the property and any accompanying paperwork in order to determine the property’s legal status.

This procedure that banks use to assess a buyer’s creditworthiness is very beneficial to him or her. The legal verification of the property by banks, which is carried out by experts in the industry, is actually of great assistance because a novice buyer might not have the legal knowledge to review the property documents and be able to notice any anomalies.

All original property-related documents, such as title deeds, no-objection certificates (NOCs), and other ownership papers would be examined for this reason by the bank’s team of legal specialists, who are ordinarily licensed attorneys.

 

property legal verification entail

It should be noted that while the applicant must provide copies of the property documents when completing his loan application. The original documents must be shown together with the entitlement when the bank’s legal team visits the property to inspect it. The buyer must speak with the seller and make sure that the original documents are prepared for inspection before the team visits at the scheduled time and date.

The buyer must show all the paperwork proving that the builder has the necessary permits in place in order to start construction on a property that is currently under construction and has never been owned by anyone else. There are several of these, such as the starting certificate, NOCs from various authorities, encumbrance certificates, occupancy certificates, etc.

If the buyer buys the apartment off-market, he will need to provide the bank’s legal staff with a trail of documentation proving the property’s prior owners. The buyer will have to ask the seller to make arrangements for all that paperwork if a property has, let’s say, changed hands four times since it was built.

If the seller is the sole owner of the property and there has never been a change in ownership in the past, the process would be simpler and the paperwork lots less. In this instance, the bank’s legal team needs to see only the original purchase documentation.

The legal team will write and transmit a report to the bank after reviewing each document, if necessary, saying that they find no problems with the legal title. If there are problems with the property title, the report will make note of them, and the bank will deny your request for a mortgage.

 

Legal verification’s effect on house loan applications

No bank will ever provide financing for the purchase of a property. That is involved in a difficult legal matter or court dispute. If the legal team submits a negative report, be prepared for the lender to flatly reject your loan application. The buyer, however, benefits greatly from this because they are shielded from entering into a bad contract.

What is property verification using technology?

Technical evaluation is the second sort of verification that banks carry out prior to granting a request for a house loan. The lender uses this procedure to assess the physical condition of the subject property. The technical experts visit the property, assess its market value, physical condition, and building requirements, and then decide on the loan they could provide for it.

Keep in mind that the bank will sell this property on the open market. To recoup its losses if there are any further defaults. Therefore, if the bank anticipates making only Rs 90 lakhs from the market if it were obliged to sell the house. It will not grant you a housing loan of Rs 1 crore. The technical evaluation team will carefully review the property’s map. Physically check the carpet area and the property’s physical characteristics. And then assign a value to the property based on the going rate for similar properties in the area.

 

property verification using technology

The value of identical homes in two distinct Delhi neighbourhoods will differ because. While the average price per square foot in one neighbourhood might be Rs 5,000, it might be Rs 50,000 in another. The crew will also examine the structure to check if it was built according to all regulations. The team will take into account the labour costs in that specific city. As well as the quality of the materials utilised for construction when determining the property’s value.

Similar homes in comparable locations in Delhi & Lucknow, for instance, will cost differently since labour costs in the national capital are more than in the capital of Uttar Pradesh. Additionally, building supplies will be more expensive in Delhi than Lucknow. Costs will also be determined by factors unique to the local area.

The technical evaluation team will deliver a report to the bank outlining. The value of the property based on their observations. Expect to receive 80% of the property value as determined by the bank’s technical evaluation team. Since banks normally give home loans for 80% of the total worth of the property.

 

Technical verification’s effect on mortgage loan amount

Let’s say you are spending Rs. 1 crore on a house. You arrange for Rs 20 lakhs from your own resources. And seek for a home loan of Rs 80 lakhs from the bank. Because you are aware that banks normally do not lend more than 80% of the house cost as a loan. Now that the property has been examined by the bank’s technical assessment team. It has been determined that the market worth of the property is not greater than Rs 90 lakhs. And it indicates this in the report.

Merely Rs 72 lakhs would be available to you as a home loan from the bank if its loan-to-value (LTV) ratio is only 80%. And it is utterly unwilling to make any exceptions. You would therefore need to make your own arrangements for an additional Rs 8 lakhs.

 

Charges for legal-technical home loan verification

The majority of the time, lenders contract with outside companies to perform the property’s legal and technical verification. As a result, the borrower is virtually always required to cover the associated costs. While some banks charge a separate cost for legal and technical evaluations, others may combine it with processing charges.

Depending on the lender from whom you are borrowing money, the fees will change. Typically, the bank will charge you a flat cost for the legal and technical review that ranges from Rs 5,000 to Rs 10,000.

 

Benefits for homebuyers of newly constructed homes, verified legally

In order to start a new housing project, builders typically collaborate with many banks. Only after carefully considering the entire project’s legal and technical ramifications do the banks decide to join with the builder. Therefore, buyers who invest in properties that are still under construction have an advantage because the financial institution will process their home loan request quickly after looking at their personal creditworthiness and no time will be wasted performing the legal & technical evaluation of the property.

 

 

 

 

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