WHENEVER a property is bought or sold, sooner or later price becomes a pretty significant part of the equation. This week, we’ll take a look at how valuations are calculated, who needs them, and how they can help you.
After a decade in business, I can honestly say (and you don’t hear an estate agent say, and mean, that often) the old dictum is true: every property sells. Even places I never imagined would get a visit, find a new owner, eventually. Even at the very top end of the market, where money is no subject, let alone an object, for debate what really makes a property sell is the right price.
Knowing the correct answer to the inevitable question of ‘how much?’ is not only important to buyers and sellers, but also to tax authorities that demand a share of the sale, lawyers dealing with probate and matrimonial disputes, and, first and foremost, the financial institutions that often put up – for a price of their own – much of the cash.
“Banks require, in effect, a ‘risk assessment’ to provide an opinion on value and an overview of the property for lending purposes,” confirms Paul Gibson, a member of RICS (the Royal Institution of Chartered Surveyors) and one half of Gibson Gale Ltd., a Gibraltar-based valuation firm that has served clients on the Rock and across southern Spain for a decade and a half.
In Spain, Paul explains, the process involves:
- 1) Obtaining copies of the deeds, via a nota simple (information extract) or, preferably, escritura (public deeds), and the cadastral entry
- 2) Inspecting the property – “looking at location, type, and quality,” he says – including a full, measured survey of the building and, sometimes, the land
- 3) Comparing relevant sales and talking to reputable agents
- 4) Calculating value and, if required, insurable sums via build costs; 5) producing a report, including any photography and other documentation
“The basis of valuation is almost always comparison,” Paul point out. “We compare recent sales of similar properties and others for sale, often on a square-metre basis. Where there are no comparable sales or a property is unique, we use our experience and knowledge, [so it is] more subjective. A valuation only reflects conditions on a particular date, which is why lenders arrange updates to reassess the value of their security.”
Juan Áviles, a bank manager for 32 years on the Costa del Sol and now an independent mortgage advisor at his Paseo de las Limas Gestores, reckons the market has undergone huge changes because of ‘la crisis’, especially in the last three to four years. Previously, some risk-taking savings banks lent more than the most optimistic valuations, thinking the bubble would never burst. It did and so did they. Since then, those that survived “simply closed the tap,” he says.
Now, Juan says, banks typically offer loans of 50-60% of current market values, rather than 80%-plus of speculative future gains some offered before, and demand to see exactly how much is changing hands on the escritura before opening their purse strings.
Both experts agree that, sometimes, sellers are well-advised to invest in an independent valuation – “usually where an owner has been given a wide variation of values by local agents,” says Paul, or “because we all think our house is the best, but an official document is more reliable,” notes Juan – to determine the right price to put their property on the market, rather than relying on banks that act on behalf of the buyer.
Costs vary, depending on the size and value of the property in question, but start from as little as €250 and can climb “to well over €1,000 for larger units,” Paul says, adding that the process usually takes 3-4 days from instruction to the production of the valuation report. That’s not much to pay to know what your home is worth.