What is Appraisal? The Meaning, Purpose, and Influencing Factors for your Property

In the banking industry, the appraisal process is closely related to estimating the price of an object (villa or property) based on reality. Simply put, appraisal helps determine the market value of an asset accurately and the debtor's ability to purchase it.

Appraisal Purpose

According to Financial Services Authority Regulation Number 28/POJK.04/2021 concerning the Assessment and Presentation of Property Assessment Reports in the Capital Market. Assessment is a work process to provide a written opinion on the economic value of the assessment object. The regulation states that appraisal is the process of providing a written opinion on the economic value of an object based on the Indonesian Assessment Standards (SPI). The primary purpose of an appraisal is to provide an accurate estimate of the market value of an asset. Some specific purposes of an appraisal include:

Discover Exact Value

Financial institutions use appraisals to assess collateral that will be used to obtain loans. A real example that is easy to understand is when someone applies for a mortgage. One of the procedures that must be passed by the debtor is the appraisal process.

Buy and Sell Transactions

This helps sellers and buyers determine a fair price for an asset. From the buyer's perspective, you will spend money according to the object you will get with a quality that is equivalent to the selling price. As for sellers, they get a price that is commensurate with the conditions they have.

Determining Insurance

Appraisal activities will also be used for the purpose of determining the insurance coverage value. That way, if damage or loss occurs, the asset owner gets compensation according to the actual value.

Insurance companies also need this process in assessing the level of risk associated with the asset. As a result, the company can set the appropriate premium.

Tax Requirements

The next purpose of appraisal is to determine the value of assets for tax purposes, including property tax and inheritance tax. This is to ensure that the value of assets reported for tax purposes is accurate and in accordance with market value.

Ultimately, all taxpayers pay taxes based on accurate values, thus avoiding underreporting or overreporting which can cause losses to the state or taxpayers.

Factors for Appraisal Result

In carrying out the process, an appraiser or assessor does not assess it carelessly. There are several things that affect the results of the assessment. For example, in the context of mortgage appraisal, here are several factors that affect the appraisal results:

Property Location

The location of the house is a crucial component in determining its appraisal value. If the location of the villa is strategic, the appraisal value will be higher.

Building Condition

The physical condition is also a consideration in the results of the appraisal analysis. If the villa is not maintained, it is difficult to expect the appraisal value.

The documents in question include the Deed of Sale and Purchase (AJB) and certificates such as the Certificate of Ownership (SHM).

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