Last Updated on March 8, 2023 by hassan abbas
WHAT ARE REAL ESTATE VALUES, WHAT ARE THEY USED FOR AND HOW MUCH DO THEY COST? FIND HERE ALL THE ANSWERS TO YOUR DOUBTS.
Are you going to buy or sell a house and you are not sure what price to put on it or how to know if it really costs what the owner asks for it? Do not worry, you’re not the only one. To resolve the above, there is the figure of the real estate appraisal. Said estimate helps to clarify the real value of a property, beyond any personal assessment.
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What is a real estate appraisal?
The real estate appraisal gives confidence to buyers and sellers when determining the fair market value of a property. It is defined as a report on a property that analyzes both the physical state of it, and its environment to estimate its value in that context and in a given time.
“Valuation methodologies are universal, but three approaches are normally used,” says Jesús Ramón Orozco de la Fuente, CEO of Tinsa México.
The first is the cost approach, it is the most basic in which the cost of the bricks, the value of the land, of all special and complementary facilities are determined. The result indicates what it would cost to replace that property.
Likewise, there is the market approach that involves taking a ‘photograph’ of what is happening in the market at a certain time, in an area or radio near the property to be valued. In this approach, a series of samples is obtained and, through statistical methods, the value of that property is calculated.
“Then there is a homologation process in which the subject property is rewarded or punished and that leads to an average homologated unit value that you then apply to the construction surface of that property and gives you the market value, so that -in theory-, it should be able to be sold in a period of 30 to 90 days or so “, details the manager.
There is also the method of capitalization of rents that serves to estimate the value of the property according to what you can demand to exploit it for rent, that is, how much they will pay you monthly, discounting maintenance and taxes.
These three approaches are fundamental, what changes are the regulations to be applied according to the country or state where the valuation is carried out and its purpose. For example, if the appraisal has a mortgage purpose, that is, if what you want is to determine the value of a property to request a mortgage loan in Mexico, the valuation must comply with the regulations established by the Federal Mortgage Society (SHF) . If there is any tax requirement, a cadastral appraisal is applied where each municipality issues different regulations through its cadastres.
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Types of real estate appraisal
We have already established that the main function of a real estate appraisal is to provide clarity about the real value of a property. Both the buyer and the seller in a real estate transaction can request it. The first is asked for the appraisal as a requirement to obtain a mortgage loan , the second is used to know what the market price of your house or apartment is.
But a real estate appraisal is very useful not only when selling (or renting) a property or requesting a mortgage to buy it, but also when calculating or rectifying taxes and insuring a property. Among the different types of appraisals related to a property are the following:
Taxes for buying and selling a property 24847
What is the real estate appraisal process like?
The most common types of real estate valuation are mortgage, commercial, and rental. In the mortgage appraisal, the professional appraiser goes to the house and makes a meticulous inspection of the environment and the house itself. They are analyzed among other aspects: the construction, its distribution, finishes, quality, state of conservation, remodeling and proximity to means of transport and services. Subsequently, the appraiser must search for homes that can be compared with the one being analyzed. Once you have all that information, you can generate the appraisal. In this case, the appraiser must be registered with the Sociedad Hipotecaria Federal .
Although the borrower can choose the valuation unit (UV), most banks already have a list of providers to choose from. In the case of the Infonavit and Fovissste Valuation Units directory , it is possible to choose almost any UV found in the SHF register.
A commercial valuation, construction aspects, property characteristics, location, services and infrastructure are also taken into account. real estate rental, the price of a rental has to do with many factors, such as location, number of bathrooms, bedrooms, parking, condition of the rooms, services and furniture in case of having this.
What is the relationship between the appraisal price and the final sale price?
Ideally, the final cost of a property should be very close to that estimated by the property appraisal, but other factors often play a role. For example, if the owner has an economic emergency and urges you to sell your property, you can lower the price to quickly close the deal; Or if the buyer really wants to keep a house or an apartment, they might be willing to raise their bid to make sure of it. Those types of situations are those that, in the end, distort those values (between offer value, appraisal value and closing value) and it does not mean that it is right or wrong, it simply implies that value corrections are being generated.
Requirements to carry out a real estate appraisal
Among the documents that must be presented for a professional appraiser to carry out his work are the deed of the property , the architectural plans, the property bill, the water bill and the official completion of work for new housing. Preferably, make sure of the requirements requested by the financial institution from which you will request your mortgage credit.
How much does a real estate appraisal cost?
It is not the same as hiring an appraisal from an independent professional than from a company or a bank. Differentiated rates are handled.
What is the validity of a real estate appraisal?
The regulations of the Federal Mortgage Society establish a validity of 6 months. This is so because it is considered to be the period of time in which the real estate market could undergo some considerable change, that is, some alteration that could really affect the value of a property, either increase or decrease it.
Can a land appraisal be done?
If possible. In this sense, what is done is a comparison of markets, since we are talking about land use. The drawback of doing this process in cities as large as Mexico City is that there is less and less land available, which complicates the finding of a comparable sample to estimate a value by homologation.
Now that you know the ABC of real estate appraisals, search for the house for sale or the apartment for sale of your dreams, or, go to Vivanuncios, the eBay real estate portal in Mexico, to take a look at the prices of homes such as yours. Just remember that it is always better to have the advice of professionals in real estate valuation.