What are the differences between a Valuation and a Real Estate Appraisal?
It is common to confuse the terms real estate valuation and appraisal, but they are really two different concepts that seek different objectives. Depending on the case and what the client really needs, the value of their property will suit one or the other. In this article I will try to clarify both concepts, establishing the differences according to their purpose so that it is as clear as possible when we will be interested in asking or making a valuation ourselves and when what we will need will be a real estate appraisal signed by a competent architect or technician.
Real estate valuation. What is it?
Really, a property valuation is just a value or a price, without legal character, that is assigned to a property approximately and in relation to the market. Since it is devoid of legal responsibility, it is not necessary to obtain it to visit the property or to carry out a detailed study of its characteristics or conditions. It is enough to take into account a few registration or cadastral data to be able to carry out a simplified market study that allows us to assess it.
Its usefulness is usually relegated to calculating an approximate price at the time of putting a property up for sale.
Real estate appraisal. What is it?
Real estate appraisals, on the other hand, do have a legal character and therefore the fixed value obtained as a result after a standardized appraisal process and that appears in the final report, must be subscribed by the architect or certifying technician who signs it. The process for obtaining the value of the property in the appraisals follows a more complex methodology, regulated by Order ECO/805/2003 and can only be subscribed by technicians authorized for it.
For appraisals, there are a greater number of possible purposes but these are the most frequent:
- Mortgage appraisals. They are carried out by a competent architect or technician under the protection of an appraisal company approved by the Bank of Spain.
- Distribution of assets in an inheritance or in the process of marital separation. In such cases it is common for each party to present an appraisal and if there are discrepancies between them and an agreement is not reached, it is usually resolved in the courts with a third appraisal carried out by an independent technician.
- Contradictory appraisals for the Treasury. In a changing and downward real estate market situation, the real value for which a property is acquired is usually much lower than what the Public Treasury considers theoretical. For this reason and in the face of the amount of taxes to be paid, it usually values the property with a recharge above the amount that has actually been paid. A widespread and possible practice to combat this fact is to present an appraisal of the property that certifies that the real value of the same so that, if it is really lower than that considered by the Treasury, the tax burden borne by the property is reduced.
So, am I more interested in a Valuation or a Real Estate Appraisal?
For everything we have seen we will be more interested in asking, or carry out an Assessment yourself (if you have the knowledge because there is no obligation to be carried out by a qualified technician), or commission a Real Estate Appraisal to an authorized and competent architect in the matter, according to the purpose for which we need the value of our property.
If it is in a personal capacity as a reference or to establish a purchase price, we are likely to be more interested in a valuation. If, on the other hand, the value is required by a lawyer, the bank, the Treasury… what we will need due to the legal nature it has, is a Real Estate Appraisal subscribed by an architect or qualified technician.