Whenever a customer approaches a Bank seeking credit facilities from the Bank, invariably securities are insisted upon. Sometimes, loans are sanctioned on the value of moveable assets and advances are collaterally secured by equitable or simple mortgage of lands / buildings. Sometimes facilities extended by one Bank are taken over by another Banker, not only with respect to the old securities given by the clients but with respect of the assets generated out of Bank’s finance.
In essence, valuation of the properties is an important function in the day-to-day lending business of the Banks. Even to protect the assets charged to the Bank or funded by the Bank, insurance policies have to be taken and for that purpose also valuation is needed.
Usually, the value of a property depends upon the materials of which it is made up of, the age of the property, the geographic location, the surrounding developments, the neighbourhood, etc. One important factor which contributes to the value of a property is the clarity of title of its owner and the encumbrances riding on it.
Some people have a conception that a valuer need only to take care of the material and location aspect and it is not his purview to look into the title aspect of it. But the conception is not correct as the title to the property has a bearing on its valuation. A property infested with long-drawn litigations or various claims will not in reality, fetch the value it would have otherwise got with a clear title. Similarly, a property tenanted will not be able to command the same value if it is owner occupied, since the purchaser has to spend considerable amount of money and also time to get vacant possession of the property. Thus, possession of the property is as title to it while arriving at its value. Hence, while determining the value of a property, the valuer should keep in his mind the devolution of title, the actual possession of the property, various claimants over it such as minors or court orders adversely affecting possession and title to the property.
A valuer, while assessing a property, should ascertain the custody of the original title deeds to ascertain the possibility of equitable mortgages over the property. Discreet searches in the Sub-Registrar’s Office, Taluk/ Municipal Offices and the Offices of various Township / Development Authorities which have a bearing on the local administration of the property for ascertaining whether the property is built on any reserved area or prohibited area or the possibility of an acquisition by State Government – all these factors have a bearing on the valuation of the properties.
In one instance, when the valuation of the property was done by one Valuer for ‘X’ Bank, another valuer of the same Bank pointed out the same set of documents were deposited with another institution and the said institution has already put the same property for auction. Such things can happen when there are fabricated set of documents presented as security.
In another incident, it happened that apart from being multiplicity of Institutions claiming to have taken mortgage of the property, there happened to be multiple persons bearing the same name as Guarantor and when the Bank decided to take possession of the mortgaged property, they could not do so as the identity of the property and that of the owner of the property could not be tallied as the person supposed to have mortgaged the property denied even having gone to the Bank in question and lodged a police report.
Apart from such risks in identity of property and its holder, the valuer has to be more careful while submitting his report on valuation. Though it is necessary for the valuer to enquire about the genuineness of the owner of the property and the property in question, he should submit his report to the concerned authority, preferably in person or with sufficient care to avoid interpolations. In one instance, a Bank entrusted the valuation of secured property to its empanelled valuer but later it transpired that the actual valuation and the report on valuation available to the concerned authority varied very widely and foulplay was suspected.
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