Property valuation methods and criteria

If you want to dedicate yourself to the world of Property valuation and want to learn more about the process to value a property, then you will discover in a simple and simple way the most used methods.

According to the R.A.E,“to tax is to officially set the maximum or minimum price for a commodity”.

Property valuation is a document signed by a competent professional and aims to establish in a justified way the value of a good or the rights they have over it. To carry out this report, you must have established criteria previously and develop a methodology appropriate to each type of movable or immovable property.

If the Property valuation has a mortgage purpose, it must be carried out by an approved appraiser. This is a professional certified by a Property valuation company approved by the Bank.

When we refer to mortgage Property valuations, both the methodologies and the criteria that are taken into account to prepare an Property valuation must be regulated by Order ECO/805/2003 and its subsequent modifications. In addition, the appraiser responsible for the valuation of the property must contemplate other technical factors.

Among the technical factors that are taken into account to prepare an official Property valuation, the location, the surface, the distribution, the state of conservation of the property, the qualities, the facilities and the orientation stand out. Likewise, a market study of the area where the property is located must be carried out and have a sufficiently broad knowledge of its behavior at the time of the Property valuation, as well as the possible future behavior of the prices based on the economic forecasts of the moment.

In accordance with Order ECO/805/2003 and its subsequent amendments, the technical Property valuation methods that can be used to carry out Property valuations are:

  • The comparison method: according to Eco Order 805/2003 and its subsequent modifications, with the comparison method two technical values are determined, which will be called, value by comparison, which allows to determine the market value of a certain good, and value by adjusted comparison, which allows to determine its mortgage value. For the realization of this method, at least six comparable transactions or offers of real estate of similar characteristics in the same area should be used, which adequately reflect the current situation of that market. Once the comparable most similar to the appraised property have been selected, the homogenization process will be carried out taking into account the criteria, coefficients and / or weights that are appropriate for the property on which the Property valuation is being carried out.
  • The cost method: this method calculates the replacement value (gross and net), taking into account the value of the land and all the costs that would be needed to build a property of the same characteristics, with current technology and materials, applying the corresponding physical and / or functional depreciation.
  • Method of updating: according to Order ECO 805/2003 and its subsequent modifications, through this method a technical value will be calculated that will be called value by update, which allows to determine both the market value of a certain good and its mortgage value. This method is used to calculate the value of a property taking into account the current value of the income that the property Sydney Property Valuation generates or is likely to generate in the future.
  • Residual method: in accordance with Order ECO 805/2003 and its subsequent modifications, using this method a technical value (residual value) will be calculated, which allows determining both the market value of a certain property and its mortgage value. With this method, urban and developable land, buildings in project, under construction and paralyzed works can be calculated by means of the dynamic calculation procedure (dynamic residual method). Plots and buildings in rehabilitation in which the construction or rehabilitation can begin within a period not exceeding one year will be carried out by means of the static calculation procedure (static residual method).

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