I want to have my property appraised, but what should I do?
March 3, 2022
What are the valuation methods?
There are two main values depending on the objective pursued:
- Market value: The value that a third party is willing to pay through a private contract between a seller and a buyer.
- Mortgage value: The value that a professional assigns to a property through an appraisal. This step is necessary to make a sale that requires financing from a bank.
Other relevant methods:
- Fiscal value: the method used by the Treasury for the payment of taxes derived from the property.
- Cadastral Value: it is an administrative value that depends on the criteria of the municipality, considering aspects such as: location, production body, market values, etc. This value is based on the value of the land on which the property is located.
- Land value: this is the price of the land of the property and raw material. Any property has land value, even if there is no free space left to build.
In the usual practice in real estate valuation, there are four technical methods to make this estimate: comparison, residual, cost and updating.
- Comparison method: This is the most commonly used method. It includes comparison with other commodities with similar characteristics of known value. The regulations require a minimum of 6 witnesses, weighted by a factor, to resemble the commodities we value. With this, we will obtain a unit value m2 per m2 object of property valuation, which will assume the same market value.
- Residual method: When the comparison method is not feasible, since there are not enough real estate witnesses, this method is used, although it is somewhat more complicated. This is the main axis together with the comparison.
- Cost method: Calculates the cost of replacement or substitution of the property being valued. Applicable to the valuation of all types of buildings and building components. In this method, a technical value, called replacement cost, is calculated. This cost can be either dirty or net.
- Method of rent updating: It is, in a simple way, to calculate the value by updating to the appraisal date all the net rents that the property will generate by means of economic formulas. It is a complex method and is used only for valuing large businesses.
What do they look for in an appraisal?
Approved appraisers base their official appraisal on many criteria. The most important are the location of the property; the built and useful surface area; the state of conservation; the distribution, installations and qualities; the lighting and orientation of the property and the elevator.
- Location of the property: The location and neighborhood of a property is one of the key factors in determining its price in sales contracts and appraisals. For example, a property in one of the best parts of the city (but in a street with many nightlife bars) will have a lower valuation than an apartment in a pedestrian street with all services.
- Built area and usable area of the dwelling: This factor is very important in the valuation of the dwelling.
- Another relevant criterion is the condition of the property: if it has been repaired or if the property is renovated, its value will increase. The appraisal of a property also depends on the type of building.
- Layout, amenities and quality of the property: The final value of the property is also affected by the layout within the property. In recent decades, this standard has changed significantly: in the past, buildings were characterized by their spaciousness, long corridors and separation of rooms. Now that everything has changed, it is more normal to find homes with a square layout and larger, brighter spaces that are easier to sell. These trends affect property values, albeit to a limited extent. The installation and quality of the building (electrical and plumbing installation) is also taken into account, as well as the type of door and window closures and the condition of the floor and wall coverings.
- Lighting and orientation of the property: The orientation of the property is fundamental, since it greatly influences the amount of light, temperature or heat. The more natural light a property has, the better it will be rated.
- Elevator: Another fundamental aspect will be whether or not it has an elevator. If the answer is yes, its appraised value will also increase.
It will also be necessary to find out if the property has been affected by any type of expropriation or urban planning, or if the building has undergone a technical building inspection.
How is the value of real estate calculated?
The best way to calculate the selling price of your home (and any property in general) is through a real estate appraisal, which includes a legally binding technical opinion; this document presents a commercial appraisal of a property, reflected in monetary figures.
Once the appraised value is issued, the expert will send the report to the technical control department and the appraisal department will be responsible for supervising and approving the appraisal.
During the verification process, check all the information provided in the report, registration documents and valuation method used. Once all verifications are completed, the appraisal report will be approved and sent to the client signed and certified.
There are many factors that influence the appraisal of a property, that is why in Espígul we want to help you and accompany you in the process.