Any of us can find ourselves in a situation where we need an appraisal of the property we own or partially own. There can be several reasons for this, the most common of which is if we want to sell the given property. Among the reasons, unfortunately, it is also common that the heirs have to find out about the distribution of real estate assets left by a relative. Or spouses decide to separate and the joint property must be valued for the divorce and property division. Perhaps the second most common reason is taking out a mortgage-based loan or taking out insurance.
In the latter two cases, we don't have to bother looking for a specialist, because if we want to take out a loan, the bank only works with the appraiser it commissions. In the case of insurance, after specifying the main parameters of the property, the insurance agent calculates a value using an average price per square meter based on his own database. However, in these two cases, we can expect that the real estate value shown in the appraisal certificate will be lower than the real market value.
If, as an owner, you decide to sell your property, it is worth using the help of a professional to determine the market value.
So let's see how an official property appraiser works...
From the point of view of valuation, the current real estate market situation is always taken into account.
The market value means the price for which an interest in an asset can be expected to be sold fairly, within the framework of a private law contract and at the time of the valuation, assuming the following:
– the seller is willing to sell,
- a reasonable length of time is available for conducting sales negotiations, taking into account the nature of the asset and the market situation,
- the value does not change during the negotiation period,
- the asset is freely marketed, it is announced with appropriate publicity,
- special customer special offers that differ from the average will not be taken into account.
If the demand is higher than the supply, so there are more buyers than sellers, the seller is in a stronger position, and the prices are higher. The real estate market also works on this principle. In practice, however, the real estate market is not a perfect market, the theories of the "perfect market economy" cannot prevail. After all, the information is not complete, the competition is not clear, and the barriers and influence of the government and other institutions are present.
The task of the appraiser is to try to estimate the price of the property within the deadline and keeping in mind the many influencing factors in the market. The specialist is needed in order to be able to consider which of the factors helps in determining the value closest to reality.
The time horizon for estimating the turnover value is short-term, assuming that the property can be sold at the time of the assessment. Considering the short time horizon, the risk of possible obsolescence (e.g. moral obsolescence, environmental obsolescence) is not significant.
Step by step…
During the on-site visit, the appraiser takes photographs and occasionally a floor plan. The building is examined using the methods of visual building diagnostics. In the case of this type of examination, no excavations (demolitions to examine hidden structures), instrumental tests and measurements, static or other calculations are carried out. When forming the opinion of the expert conducting the inspection, he relies on the phenomena that can be seen, felt, heard and smelled at the site, as well as on the information received from the owners present, as well as on his theoretical and practical professional knowledge.
During the consultation with the owner, the purpose of the understanding must be clarified, which will also be included in the subsequent document. The evaluator records the basic data, and can start working with the official documents based on this data collection. For example, the geographic number or knowing the exact address is essential in order to retrieve the property's registration data (property sheet, map copy).
An important part of the site visit is also the assessment of the environment. Taking the time to go for a walk is a great help for later comparison. During our walk, it is worth paying attention to the following: properties for sale in the area, houses under construction, sidewalks, roads, bus stops, playgrounds, kindergartens, schools, restaurants. After all, we can see that the value of a property in a frequented location can be higher than that of a property in a "no-street".
Most of the rest of the work takes place behind a desk...
Description of the property's surroundings
– Presentation of the region (e.g. Balaton, Danube Bend)
- Presentation of the settlement
Description of the property
– Presentation of the state according to the real estate register (based on the property sheet)
– Description in nature (based on a site visit)
Technical description of the building
– Building structures
– Construction engineering
Determination and method of turnover value
In European real estate valuation practice, the use of valuation principles and methodologies defined in the EVS 2016 (European Valuation Standards) series of standards developed and published by TEGoVa (The European Group of Valuer's Associations) is recommended and widely used in professional circles. adopted.
25/1997 on methodological principles for determining the loan collateral value of real estate that is not agricultural land is largely harmonized with this set of standards. (VIII. 1.) PM decree. The decree states that "the market value is the basis for determining the value of the loan collateral" and describes the relevant valuation methodologies in detail in its appendices, therefore the provisions of this legislation were also taken into account during this evaluation.
According to EVS 2016, unless otherwise provided by law, the definition of market value accepted by TEGoVA is as follows:
"The estimated amount for which the property can change hands on the valuation date between a willing buyer and a willing seller in the context of a transaction following appropriate marketing activities, where the parties act informed, prudent and without coercion."
In European practice, real estate can be estimated using the following methods:
– Evaluation based on the analysis of market comparative data
– Evaluation based on yield calculation
– Cost-based (net replacement principle) evaluation
In practice, the market comparison method is most suitable for evaluating a family house or apartment. The yield calculation method can be used effectively where we want to use our real estate for some purpose, e.g. hotel, boarding house, catering unit, office, etc. Cost-based evaluation is more typical for insurance companies, since if the house burns down, it must be rebuilt.