Real Estate Appraisal Knowing how to evaluate a property can be decisive in the negotiation process for sale
Real Estate Appraisal is a necessary process for the sale and purchase of houses and apartments. It is through it that the real value of the property is defined assertively, following all the rules, criteria and conditions.
This investigation is done through a real estate appraisal report, in which it is possible to measure relevant aspects for pricing, such as location, need for renovation, square footage of the property, among other relevant factors.
To help you, we have gathered in this article the main information about property valuation: what it is, what criteria to use and what are the most used methods in the real estate market.
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What is real estate valuation?
Table of Contents
Real estate valuation is the analysis of the market value that a real estate asset is worth. It is based on technical procedures and regulatory standards, also taking into account other criteria, such as the characteristics of the property and the real estate market in the region where it is located.
When is real estate appraisal necessary?
Real estate valuation is necessary for all processes of buying and selling real estate, financing, construction or even sharing assets from an inheritance. After all, only with this document is it possible to arrive at the real price of the property, avoiding losses to the owner or in court decisions.
Real estate valuation: what buying and selling criteria to use?
There are several criteria that must be taken into account by professionals who carry out real estate appraisal. We have gathered the main ones:
Location
Location is usually a key point in the valuation of real estate. This is because market values vary greatly between regions. City, neighborhood and street are important factors.
Criteria such as easy access to public transportation, shops and essential services, such as the market, pharmacy, gas stations, and even proximity to spaces with nature and leisure directly influence the final value of the property.
Outside and neighbor noises
Noise pollution is a factor that usually reduces the value of real estate. If the property is close to concert halls, public fairs, traffic jams or if it has noisy neighbors, it tends to be devalued.
Safety
Large cities tend to have an increase in cases of violence, but there are still locations that are valued for being considered safer.
Likewise, if the property is close to places with a history of robberies or other episodes of violence, the value tends to fall.
Internal structure of the apartment
During the appraisal, the internal and external structures are factors that directly influence the final value of the asset. The following are considered criteria for structural evaluation of properties:
- Coating
- Painting
- Facade
- Electrical and hydraulic
- Ceilings and roofs
- Glasses
In addition, extra points such as planned cabinets, porcelain flooring, structural renovations and good finishing add to the value!
External structure
In addition to the apartment itself, a well-equipped building in good condition (painted façade, modern design) becomes relevant when pricing a property. Elevators, concierge, façade, leisure areas and parking spaces are attractive to future residents.
Ease of transaction
Another point that will increase or decrease the final value of the property is the ease of the transaction. Many brokers disregard this factor when making the appraisal, but having all the documents ready and conducting the purchase process in an agile way are positive points for those who want to acquire or sell a property.
Property valuation methods
In the same way that there are several criteria to be considered in the valuation of real estate, there are also several methods used by real estate professionals.
The evaluator must choose the way to make use of these categories. The main methods are evolutionary, involutionary, and comparative.
- The evolutionary method is more indicated in the evaluation of urban properties. It is done from the calculation of the value of the land and its improvements.
- The involution method, on the other hand, is used in the evaluation of unusual terrain. Here, a technical and economic feasibility study of the value of the gross urban land is carried out.
- Finally, the comparative method, which is the best known. In this form of evaluation, a comparison is made with market data that comes close to the reality of that property, such as the same neighborhood, the same number of bedrooms, the same leisure areas, etc.
What is the most used method?
The most widely used real estate valuation method is the Direct Comparative Market Data. It is based on transactions of the same type of property, which is being negotiated at the same time and with the same spatial location, to enable the comparative analysis of values.
These values of real estate transactions are analyzed to obtain an average value. This result is done under a weighted average, because, even if they have similar characteristics, the properties are always different.
Appraisers must make this analysis in accordance with the appraisal standard, in addition to considering aspects pertinent to the property itself, to avoid stipulating prices that differ from what is being practiced in the market.
Real estate appraisal report: what it is and how to do it
The property appraisal report is a technical document that determines the real value of a real estate asset. This document is made to ensure that the negotiation of the property will be done safely. It must be issued by a trained professional or a specialized company.
This report must be built based on the standards established by ABNT. Generally, it is required in purchase and sale processes, cases of lawsuits, actions involving rental amounts, indemnity, and other purposes. The real estate appraisal report is mandatory in financing applications to serve as a guarantee so that the value of the property can cover the investment if there is no payment of the debt.
Who should make a real estate appraisal report?
This type of document must be made by trained professionals with higher education and specific knowledge. It can be done by engineers, architects, or real estate professionals. It is important that everyone knows the market to make an accurate assessment.
Regardless of who is in charge of the analysis, it must be done based on the techniques provided, which direct the inspection of the property and the mathematical treatment of the samples.
In addition, the professional who issues the report must also have knowledge of economic analysis, as changes in the economic scenario also directly affect the final price of the property.
Can you see that a good real estate valuation is extremely important for correct pricing and ensuring security in real estate transactions?
That is why it is necessary to take into account all the points we have mentioned throughout this article before making this type of analysis!
