A home appraisal is the process by which a licensed appraiser conducts a thorough inspection of a property to determine a value based on the purpose for which it was requested. The resulting value does not always match the selling price.
In addition to mortgage appraisals, which are necessary to contract a home loan, there are other types of appraisals, such as expert, cadastral, tax, expropriation, accounting or consultancy appraisals, each of which will yield different valuations.
Why do I need a professional valuation?
A house is often the largest single financial asset that anyone owns. Knowing its market value is essential for making informed financial decisions in transactions, inheritance, separation of property or investment transactions.
The appraisal report is a document that every financial institution will use to calculate the maximum amount of a mortgage loan.
What can I expect to see in my valuation report?
Among other aspects, an appraisal includes the market value of the property, characteristics of the property, cadastral data, the state of conservation of the asset, information about the locality and the surroundings.
It will broadly document the following:
- Applicant's details
- Identification and location of the property
- Registry and cadastral data
- The purpose of the valuation
- Checks and documentation:
- Physical identification of the property.
- Visible easements and apparent state of preservation and state of construction.
- Occupancy status of the property and the use or exploitation to which it is put.
- Architectural heritage protection regime.
- Public protection regime.
- Adaptation of the property to current urban planning.
- Locality and environment:
- Core type
- Occupation and income level.
- Population
- Evolution and density of the population.
- Delimitation and urban features.
- Infrastructure maintenance.
- Equipment
- Communications.
- Other features of the environment
- Building data
- Distribution
- Terminations
- Specific facilities
- Market analysis (supply; demand; current price ranges for sale or rent; supply-demand and revaluation expectations; differences between market value and mortgage value).
- Data and calculations of technical values.
Once the physical verification has been carried out and the registry, cadastral and legal documentation has been analysed, the valuer will follow an established technical valuation method and express the result in a report.
What is the purpose of the ECO 805 Valuation Order?
A Property Valuation Order ECO 805 is a mandatory report for:
- Mortgage guarantee of credit or loan.
- Coverage of technical provisions of insurance undertakings.
- Determination of the assets of real estate collective investment undertakings.
- Determination of the real estate assets of the Pension Funds.
- The appraisal is also mandatory for the valuation of real estate owned by financial institutions, real estate collateral or foreclosed real estate.
The ECO regulation (which regulates how real estate is valued) does not include sustainability criteria. Although it does not explicitly take energy savings and sustainability factors into account, it could implicitly do so, as any energy efficiency factor that is positive and attractive for better marketing or better maintenance could implicitly affect the value of the asset and can be taken into account by the valuator.
How much is a mortgage appraisal worth?
There is no set price and each valuation company sets a value freely.
The value of the appraisal depends on the location and size of the property. For example, a 100 m2 property in Madrid will cost between 300 and 350 euros (April 2023).
If you want to know how much the valuation of a property costs, you can request a quote here.
Who should pay for the valuation, the buyer or the seller?
The cost of the appraisal must be borne by the buyer. The new mortgage law establishes that the mortgage applicant is the one who will pay the price of the mortgage appraisal, and therefore can freely choose the appraiser, who must be an independent expert and be supervised by an appraisal company approved by the Bank of Spain.
Validity of a mortgage appraisal
The regulations set the validity of a valuation report at 6 months from the date of issue. Why? As the market is constantly changing, it is understood that there may be changes in the value after 6 months, although it is likely to remain valid after this period.