In the complex world of real estate investment, every step must be backed by in-depth knowledge and a well-thought-out strategy. One of the fundamental pillars of this process is the property valuation. This document, issued by a qualified professional, performs a thorough analysis to determine a property’s market value.
Why is a property valuation essential when buying a property, and how should we go about making informed decisions?
The importance of property valuations
Property valuations are often primarily linked to the sale of a property or a home mortgage, but their relevance doesn’t stop there. When buying a property, it’s vital to have an impartial and professional valuation. This is because a well-conducted valuation provides an objective assessment of the true value of the property in question. By relying solely on the seller’s asking price, we may risk paying more than the property is actually worth.
For this reason, when embarking on the purchase of a property, it’s advisable to obtain an official valuation carried out by an expert valuation technician. Furthermore, to heighten the impartiality and credibility of the process, the valuation should be reviewed and validated by a sector-approved Valuation Society.
Crucial aspects of a property valuation
The task of the surveyor is more than just a superficial assessment. In order to accurately determine the market value, various technical and legal aspects must be taken into account. These factors include:
- Location and condition of the building: The location of a property is a crucial factor in its value. Moreover, the general condition of the property, its maintenance and structural conditions are essential aspects.
- Fiscal information: Fiscal aspects such as property taxes also influence the valuation.
- Age, location and surroundings: The age of the building, its location in relation to services and amenities, and the surrounding environment play a role in the valuation.
- Construction quality and service life: The quality of the materials used in construction and the estimated service life of the property are important considerations.
- Constructed and useful surface area: Both the total constructed and useful surface areas of the property and the common areas are taken into account when assessing the value of the property.
- Layout, facilities and qualities: The internal layout, facilities and construction qualities also have an impact on the valuation.
- Use and occupation: The intended use of the property and its occupation are factors to be considered in the valuation.
- Registry burdens: The land registry is checked for any encumbrances, mortgages or other legal limitations that may affect the value of the property.
- Urban compliance: It is vital to ensure that the property complies with all town planning rules and regulations in order to avoid future legal problems.
Using real transaction data
A distinctive aspect of property valuations is their reliance on concrete, tangible data. Official valuations are based on testimonials from actual transactions and offers that have taken place in the same area. This methodology allows a solid and accurate value to be established for the property in question, eliminating guesswork and subjective valuations.
Valuation with regards to mortgages
The importance of property valuations is even more significant when it comes to applying for a mortgage. According to regulation ECO/805/200 and Law 1/2013 of 14 May, banks are obliged to carry out a valuation before granting any mortgage loan. This measure protects both lenders and borrowers by establishing a solid basis for the loan amount.
Imagine a scenario where the sale price of a property exceeds its appraisal value. If the seller is asking €400,000 for the property, but the valuation states its value at €300,000, this could influence the approval and terms of the mortgage. Banks will generally not lend more than 80% of the appraisal value, as this value acts as collateral in the event of a default on the loan.
Making Informed Decisions
Property valuations are a powerful tool that gives buyers the confidence to make informed decisions in the real estate market. By obtaining an official valuation backed by competent professionals and a recognised Valuation Society, buyers can accurately assess whether the price of the property is in line with its true value.
