The importance of carrying out a correct home appraisal

The appraisal, technically known as a valuation report, is a document signed by a competent professional to do so and its objective is to justifiably establish the value of an asset, in accordance with previously established criteria and developing an appropriate methodology for the proposed purpose.

The appraisal of an asset is subject to strict legal regulations that not only establish the criteria and methodology to carry it out, but also establish who can do it. This regulation, which in Spain is constituted by a Ministerial Order dated November 30, 1994 issued by the Ministry of Economy and Finance, is a regulation that establishes a specific methodology based on definitions and principles that inspire its drafting.

The appraisal value is reflected in a certificate that may contain observations, warnings or conditions, if there are aspects on which a comment should be made, pending documentation or questions that must be definitively resolved so that the calculated value is firm for the specific purpose for the the valuation report is issued.

A mortgage appraisal is an appraisal of a property so that it is the object of guarantee in a mortgage loan. Through this assessment, the lender, normally a financial institution, knows what the value of the loan collateral is and what risk it assumes with the mortgage operation. The mortgage appraisal has no other purpose than to serve as a guarantee for the mortgage loan, being totally independent of the amount for which the hypothetical economic purchase-sale transaction is carried out or the accrual of taxes that it entails. Banks typically lend 80% of the appraised value.

A mortgage appraisal is carried out by an independent professional, who must meet certain requirements established by law. He will generally be an architect or technical architect, and will belong to a property appraisal company, which are registered with the Ministry of Housing. Real Estate Appraisal Companies must be public limited companies with a corporate purpose limited to the valuation of all types of goods, companies or assets.

They are required to have a minimum structure and have civil liability against third parties derived from the appraisal activity. These companies must be approved by the Bank of Spain, where they are registered in the corresponding official register. They are subject to the supervision of the Bank of Spain.

The factors that influence the valuation of a property are:
  • The ubication.
  • The nearby services: green areas, leisure places, school services, doctors, supermarkets …
  • The surface: m² and distribution, whether or not it has a garage or storage room …
  • The quality of the building materials.
  • The situation of the property within the building: it is more valued if it is south facing and the upper floors.
  • The antiquity.

For the purposes of applying for a mortgage, a private buyer has the right to present to the bank the appraisal of the property that he wishes to acquire, without being obliged by the bank to carry out an appraisal with the appraiser that the latter designates.

The bank cannot reject this appraisal presented as long as it comes from an entity approved by the Bank of Spain and, if he wants to make a second appraisal as confirmation, the cost of the same cannot be attributed to the individual buyer who previously had already submitted an appraisal.

In accordance with article 3 bis I of Law 41/2007 that modifies Law 2/1981, of March 25, regulating the mortgage market, credit institutions, even those that have their own appraisal services, must accept any appraisal of an asset provided by the client, provided that it is certified by an approved appraiser and has not expired in accordance with the legal provisions, and this without prejudice to the credit institution being able to carry out the checks it deems pertinent, of which in no case It may pass its cost on to the client who provides the certification.

When buying a home, size matters and this is not always what it seems. In the homes of gated communities, single-family and farms, the difference can be really noticeable … Leaving aside errors that may exist in the advertisements, it must be clear that, when talking about surfaces of a property, we can be talking about three realities different:

Useful surface: it is the space that can be walked on inside a house. It counts what is left inside the external enclosures of a building, including the work cabinets, but not the partitions, pillars and columns. It also excludes surfaces with a height less than 1.50 meters. In short, it is the surface available for our use and enjoyment.

Constructed area: it is the useful surface of the property plus the space occupied by fixed interior walls, vertical structures and pipes (walls, drains and ventilation ducts). It includes those parts of the house where the free height is less than 1.5 meters.

Constructed area with common areas (adopted by the Cadastre): is the sum of the constructed area of the property plus the square meters of common elements (building corridors, stairs, facilities rooms, portals …), which correspond to the owner according to their coefficient participation in the building or community. This surface that is reflected in the Cadastre is the one that will be taken as a reference to determine the cadastral value of the home. This cadastral value will be, in turn, the reference tax base for the payment of the Real Estate Tax (IBI) and may be used to calculate other taxes derived from the transfer of a property, such as the Property Transfer Tax ( ITP), Tax on Documented Legal Acts (AJD) and Tax on Inheritance and Donations.

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