Everything you need to know about home valuation

The appraisal of a property is essential when applying for a mortgage, although it can also be carried out for other purposes. In any case, if you need to determine the value of a property, you will surely have some doubts such as: What is taken into account, what are the most important factors? Below, we answer all the questions about the valuation of a property.

What is a home valuation?

The appraisal of a property is the fully expert assessment of the value of a property at a specific point in time. During the process the appraiser evaluates various factors to arrive at an accurate estimate of the value of the property.

One of the most common procedures is the mortgage appraisal. This procedure is compulsory when applying for a mortgage, as the amount will correspond to a percentage of no more than 80% of the value obtained in the appraisal of the property. However, although it is the most common procedure, there are other purposes for which it is convenient to have a property appraised:

  • Knowing the price at which a house can be sold
  • To prove the solvency of your assets to the bank
  • How to distribute inheritances

What is taken into account in a home valuation?

If you are going to value your property for any of the above purposes, it will be interesting to know what factors influence the valuation. Clearly, an 80 m² property will not have the same value as a 100 m² property. When valuing a property, the valuer takes into account various technical aspects such as size, location, condition, among others, to determine the value of the property. Some of the most important factors include:

Size: The total surface area of the property is a key element in determining the value of any property. Attention will be paid to both the built-up area (total area including all the space that is covered by the building such as walls) and the usable area (area that can be used functionally and is habitable).

The distribution: the distribution of the dwelling is considered very relevant, taking into account the number of bedrooms, bathrooms, kitchen, living room, etc.

Condition: The general condition of the property is a crucial factor. The quality of the construction, the age of the property and whether there is a need for repair or renovation are assessed. A property in good condition tends to have a higher value.

Location: Location is fundamental in the valuation of a property. Consideration is given to the area in which the property is located, accessibility to services such as public transport, shopping, schools and hospitals, as well as the safety and quality of the neighbourhood.

Market conditions: a relevant factor that will depend on the real estate market conditions at any particular time. Supply and demand in the area, price trends and other economic factors are considered.

Why is the valuation of a property important when applying for a mortgage?

A mortgage appraisal is essential when applying for a mortgage. Banks need to know the value of the property in order to determine the amount of the mortgage in question and thus determine the money that will be lent to the mortgagor.

What does an appraiser look at?

When valuing a property the valuer will take into account several key factors in order to determine its value such as location, size, layout, condition and market conditions (described above). However, these are not the only factors; the valuer may take into account more specific factors such as the qualities of the property, the lighting and orientation of the property, as well as other external features of the property. For example, whether the property is located in a building or in a residential area and the characteristics of the buildings.