Knowing the real value of your property is not just a matter of curiosity: it can make the difference between a successful real estate transaction or a significant financial loss. This guide is based on the best practices of the Spanish real estate sector and current regulations, so you can fully understand how to professionally and freely value a property.
What is a property appraisal and what is it for?
A property appraisal is a technical document that establishes the value of a property in a justified manner, analyzing its characteristics according to objective criteria and methodologies. It is carried out by a qualified professional, such as a technical architect, and must be certified by an authorized appraisal company. This document is essential for:
- Applying for a mortgage: it is mandatory to present an appraisal recognized by an authorized company so the bank can determine the amount to finance.
- Division of assets in inheritances or divorces: allows for a fair and legally defensible distribution.
- Buying or selling: ensures the agreed price is aligned with the market.
- Tax declarations: used to correctly calculate taxes such as transfer tax or inheritance tax.
The appraiser analyzes the property documentation, inspects its condition on-site, prepares a floor plan, takes photos, and verifies the legality of the property in the registry.
Methods for appraising a property
According to Order ECO/805/2003, four main methods are used to determine the market value of a property:
- Comparison: The property is compared to similar properties recently sold in the same area. This is the most commonly used method for housing, analyzing properties with similar location and type.
- Cost: The value is calculated by adding the current construction cost, land value, and developer’s profit, minus depreciation. This method considers land value, construction cost, and a commercial coefficient.
- Residual: The land value is estimated by subtracting construction costs from the estimated value of the finished property. Mainly used for plots.
- Income capitalization: Based on expected future net income, used for rental properties such as commercial spaces or hotels.
Difference between cadastral value, reference value, and market value
It is crucial to distinguish between these concepts, as they are often confused:
- Cadastral value: Administrative value used to calculate taxes such as property tax (IBI). It only considers land and construction value, not commercial value. It is usually lower than market value. When valuing by cadastral reference, the cadastre does not visit the property, which may lead to discrepancies with actual square meters or property condition.
- Reference value: Determined by the administration to settle transfer taxes. Often inflated compared to market value.
- Market value: The price a buyer is willing to pay. Reflects the actual value of the property in the current market. Obtained by comparing the property with similar properties in the area.
Value comparison
| Type of Value |
Definition |
Main Use |
| Cadastral Value |
Administrative value considering land and construction. |
Tax calculation (IBI) |
| Reference Value |
Value set by the administration, often higher than market value. |
Transfer tax settlement |
| Market Value |
Price a buyer is willing to pay in the current market. |
Buying and selling transactions |
Key factors affecting property valuation
Several factors influence the value of a property:
- Location: The area, surroundings, and proximity to services such as schools, pharmacies, and public transport significantly affect the value.
- Condition: Renovations, age, and materials matter. A property to be renovated is not the same as a renovated one.
- Property features: Square meters, layout, floor, orientation, views, pool, garage.
- Documentation: Liens, debts, or legal discrepancies can reduce value.
Common errors in calculating and valuing a property
Avoid these mistakes to get a more accurate valuation:
- Confusing market value with cadastral or reference value.
- Relying only on online valuations or listings without considering the property’s specifics.
- Ignoring the actual condition of the property and necessary renovations.