chapter One


1.0 Introduction

Real estate often makes up the majority of corporate assets accepted as collateral for corporate loans. According to Babaware et al. (2013), real estate valuations are important to financial institutions, especially banks, for two or more reasons. First, an evaluation is often required during underwriting or renegotiating a mortgage advance. The valuation should provide a reasonable (future) market outlook for the property acting as collateral for the loan. Second, valuation is required when an organization or bank requests an updated valuation of collateral value for outstanding loans held on an asset report. Lenders must always have an accurate picture of every situation. This is on account of they have to realize that they can recover their credit by offering the property if the borrower defaults and they need to take ownership. The financial services authority likewise obliges lenders to guarantee that there is sufficient security for their credit by guaranteeing that the property is worth at any rate what is being loaned on it. Incidentally, the valuation additionally serves to ensure the borrower against unexpectedly borrowing more than their property is worth.

Credit transaction between financial institution and investors grew to such an extent that securities such as shares and bonds, debenture, unit trust, Treasury bill, property are required as prerequisite for advancement of capital for whatever purpose the investor may require it for, since Investment have become a driving force of future income generation to individual, corporate organization and government as well, people are so eager to invest most especially In real estate but most of the investors are either having half of what they need to invest or not having at all which will lead to borrowing from financial institution, at this junction valuation is the only determinant of fair market value of the mortgage property which will serve as security for loan.

Practically, finance sourcing is a major component of every investment programs. Also, the need to secure tangible and sustainable collateral prior to raising capital seems like a tall order for investors. Bonds, treasury bills, stocks, and shares were the alternative collateral required by the mortgagee before the loan was granted. However, due to collateral uncertainties in the event of loan default, real estate is now seen as a better alternative as one of its many functions is a hedge against inflation.

The numbers obtained during valuation activities are critical to the customer’s operations and commerce, and incorrect valuations can cost your business. For example, vs many banks v v losses by lending v v vexcess v value v loans, v many organizations v owners v v resource benefits v v were vv convinced when they were actually operating at a loss. Moreover, many businesses, while perfectly regarded as productive and profitable, were sometimes neither rational nor profitable (Crosby et al. 1999). Over- and under-valuation issues have resulted in disagreements over large amounts of cash, sometimes average Naira. It has also caused bankruptcies, loss of investments, over-collateralization and loan-granting. This issue was a source of disagreement. Therefore, claims as vgradev the reliability v of the vrated numbers v and vgradev the accuracy of the estimates/values ​​vv reported by raters have been underestimated.

1.1 Problem definition


According to Kuye (2000), due to the lack of generally accepted methods used by appraisers in valuing real estate for mortgage purposes in the metropolitan Kaduna, appraisers are required to use real estate pledged as collateral for loans. It can exaggerate or overestimate its value, most often leading to conflict. Between them, lenders and borrowers took the lead, resulting in defaults, bankruptcies, failed investments, and allowing financial institutions to lend beyond collateral value. This most often occurs when appraisers use the cost method for valuation without reference to the income approach. Other errors that contribute to this problem are lack of proof of rent, lack of proof of recent transactions, and incorrect use of capitalization rates. Worse, some appraisers try to subvert clients’ (mortgage lenders’) value claims by soliciting and accepting bribes from lenders without using proper techniques to form an opinion on value. Concentrate on fulfilling This act only raises major questions in the minds of financial institutions that require appraisals as a lending requirement.

1.2 Objectives and Objectives

The purpose of this study is to evaluate the accuracy of mortgage ratings as a lending requirement for selected banks in the Kaduna metropolitan area. Specific goals are:

Me. identify the methods used to value real estate for mortgage purposes;

ii. Identify causes of inaccuracies in mortgage valuations;

iii. Evaluate the accuracy of the mortgage valuation;

IV. An assessment of the reliability of mortgage appraisals prepared by mortgage agency appraisers and appraisers in Kaduna Metropolis.

1.3 Research question

The research questions for this study are:

Me. What methods are used when valuing properties for mortgage purposes?

ii. What are the sources of inaccuracy in mortgage valuations?

iii. How accurate are mortgage ratings?

IV. How reliable are mortgage appraisals made by Kaduna Metropolis mortgage agency appraisers and appraisers?

1.4 Scope of investigation

The study is limited to the accuracy of mortgage pricing and the impact of under- and over-pricing of mortgage assets on banks and investors. Banks and other financial institutions can lose principal and interest if investors whose assets are undervalued default, and are unable to pay their debts in the event of foreclosure. This study focuses on two individual groups of metro Kaduna appraisers, appraisers and bankers and their involvement in mortgage transactions over the period 2004-2014.

1.7.1 Geographic Description

The Kaduna Study Area is one of the oldest states in what is now the north-central geographic region and the Hausa, said to be the most popular marine reptile found along the banks of the Kaduna River, a tributary of the Kaduna River. It gets its name from the word “crocodile”. to the Niger River, an important geographical feature of the state.

Kaduna is geographically located between 10°30′ north latitude and 7°30′ east longitude, with regular wet and dry seasons. Normal temperatures drop to around 25°C and 38°C seasonally, and the state occupies a landmark area of ​​69,993 square kilometers.

1.7.2 Historical development

The Kaduna metropolitan area consists of two he municipalities, Kaduna North and Kaduna South. Kaduna State has a population of 6,0662,562 making him 4.33% of the national population. Men have stats:
Female ratio 51.29% (3,112,029 persons):
49.90% (2,954,534 people) [National Population Commission, 2007]. Two cities in the state. Kaduna North and Kaduna South, Kaduna North has a population of 367,694, or about 5.9%. Kaduna South, on the other hand, has a population of 402,390, or 6.63%. It shares borders with Kano, Katsina, Zamfara, Kebbi, Niger, Nasarawa, and Plateau states, and mainly shifts its borders to the state capital, FCT Abuja.

The Gbagyi are local pilgrims of Kaduna, obsessed with various tribes and ethnic gatherings, especially the Hausas, Katafs and small tribes in the south of Zarya.

1.7.3 Soil and vegetation

In general, the soil is typically a reddish-brown to reddish-yellow tropical iron soil. Vegetation Savanna grassland with scattered trees and shrubs. Upland soils are rich in red and sandy soils, but contain little organic matter. However, ‘fadama’ is poorly drained and despite its poor drainage, it is loamy and contains organic ingredients.

1.7.4 Social Infrastructure

Kaduna enjoys a leading position in educational development throughout Nigeria’s northern sub-region above the Niger River before formal western education was accepted and liberated by the northern regional government.Primary and secondary schools. Efforts by volunteer agencies to establish schools at both levels have provided Kaduna with an attractive position in its current state and the advantage of early establishment of educational infrastructure.

1.7.5 Economic Importance

Kaduna is an industrial center in northern Nigeria that manufactures products such as textiles, machinery, steel, aluminum, petroleum products and bearings. Pottery is highly valued by the Kaduna, especially the pre-Abuja and Minna Nok cultures. Kaduna has a large market, recently rebuilt after a massive fire in the mid-1990s. There is a large vresource about 1.6 kilometers (1 mile) around where the Yakubu Polovclub and the vKadunavcrocodilevclub are located, and the vKaduna and Rugvby clubs are in the vicinity. It has 2 airports, one of which is Kadunav Airport. Changangi Airlines is headquartered in Kaduna. Economic activity in this state in mortgage transactions in this study is assessed by sponsorship.


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