In a previous article, we wrote about the essential steps of valuation. Today, we will focus on two of them: the property inspection and the value estimate.

Why did I choose this topic? Very often, the client believes that immediately after completing the inspection of the property, the appraiser can communicate its value to him. However, the process of estimating the value is a complex one, which cannot be done "on the spot".

The property inspection and the value estimate are two distinct stages, and the first has a defining importance for the second. You already know that on the date of the inspection, the appraiser takes information from the field (the physical characteristics of the apartment, for example the degree of finishing or the age, but also the characteristics of the area in which it is located), information with which he can arrive at the estimated value of the property. Even though the value of the property is not a fact, but an authorized opinion of the appraiser, we want it to always be the correct one. Thus, we do not communicate a value without going through all the steps necessary for a "by the book" evaluation.

Estimating market value, which is one of the most common types of value (we will discuss these in the following articles), is carried out based on a thorough market analysis.

Market analysis involves identifying and extracting detailed information about properties similar or similar to the one being valued, recently sold on the market or offered for sale. This information is critically and objectively analyzed by the appraiser and the properties with the highest degree of comparability are selected, usually 3 to 5 comparables. The prices of the comparable properties are then adjusted according to the differences between their characteristics and those of the subject property.

The price adjustments of comparables are made by taking into account the differences between the following comparison elements: physical characteristics (level of finishes, surface area, height regime, etc.), legal characteristics or location. For example, an apartment that is on an intermediate floor is better compared to an apartment located on the top floor (I think we all know the reasons, we only mention problems related to roof insulation, especially in old blocks of flats, or the lower degree of thermal comfort). Both the information taken from the property inspection and the entire value estimation process are then incorporated into an evaluation report, the official document through which the value of the property is communicated.

Therefore, taking into account the above, the value of a property is not estimated only based on the inspection of the property, but other steps are also necessary. Yes, it is possible that the appraiser knows the area very well and can estimate an approximate value on site, but there is a high chance that, by not following all the steps of the evaluation, it will not always be the correct one, which can have various consequences, such as paying a larger advance to the bank for the purchase of that property.

Rigorous adherence to all valuation steps and communicating the correct value only after a thorough market analysis have helped us become the valuation company that clients always turn to with confidence.

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