Real estate valuation tries to discern the value of a certain property, usually constituted by land, building or real estate (land and building), from the analysis of the elements that are its own and that can most directly affect its value. It requires a precise knowledge of the constructive and qualitative parameters of the building, as well as the factors related to its location and urban situation, among other aspects, that characterize the area in which it is located.
Real estate Valuation should be understood, therefore, as a process of calculating an economic value, established according to evaluation methodologies and techniques that try to build an objective value, taking into account the characteristics of the good and the characteristics of its environment.
In this sense, the incorporation of statistical techniques in Real estate valuation studies facilitates the selection of the factors most directly linked to value, as well as in the establishment of evaluation criteria adjusted to the reality of the market.
The incidence of the spatial aspects that make up the territory at an economic, social, environmental and urban level are decisive in the formation of urban incomes because they are internalized in real estate values. In this line, the new technologies of geographic and territorial information systems constitute a primary tool for the analysis and evaluation of urban attributes, their disposition in the territory.
The integrated use of GIS (geographic information systems) and statistical techniques of correlation analysis acquire a great effectiveness in determining the level of interaction of the environment in real estate values, constituting a great help to evaluate the impact of the spatial context on urban values.
On the other hand, in the configuration of the territory in general, a large number of political, economic and social agents intervene, which mark the pace of growth of the city and give rise to a specific characterization of some lands against others.
In particular, within each urban nucleus, significant and even economically quantifiable differential situations can be seen between apparently similar properties, differences that refer to the physical characteristics of the property and the position it occupies in the area.
In this framework, real estate valuation constitutes a new professional discipline in which different techniques and study methodologies are combined that try to establish the real value of different real estate products, especially of an urban nature.
The real value of a good is the one that quantifies it economically and objectively, taking into account the set of qualitative and quantitative characteristics of it and the environment in which it is located. In a free market economy the value of goods is fixed, by the balance between supply and demand, being the exploration of the market, the most appropriate procedure to quantify the value of a property, so the market value must be estimated as the only real value in economic terms.
On the other hand in the International Real estate Valuation Standards 2007 we find that Real estate valuation is the “process of estimating value“. Understanding as value: “It represents the most likely price that buyers and sellers will set for a good or service that is available for purchase.
The value establishes a hypothetical or theoretical price, which will be the one that buyers and sellers will most likely establish for the good or service. So value is not a fact, but an estimate of the most likely price to be paid for a good or service available for purchase at any given time.”
The professional profile of the Real estate valuer integrates knowledge of urban aspects and other economic factors that make up the city, along with a proximity to the building sector and the costs of construction execution.
APPLICABLE REGULATIONS
Real estate Valuations relating to expropriations, sales and forced substitutions, as well as in cases of patrimonial liability of public administrations:
- Royal decree 1492/2011, of 24 October, by which approves the Regulation of Real estate valuations of the Law of the Land in relation to the final disposition second of the text refunded of the Law of the Land, approved by Royal Legislative Decree 2/2008, of 20 June, that authorized the Government to proceed, in the field of its attributions, to the development of the aforementioned Law.
The Real estate valuation for certain purposes in the free market is regulated by the following Orders and Royal Decrees (This legislation establishes rules for the calculation of the value of appraisals of real estate that enhance the technical and formal quality of Real estate valuations, with the ultimate objective of protecting more and better the interests of third parties in their conditions of insured or investors):
- Royal Decree 775/1997 of 30 May, published in BOE nº 141 of 13 June 1997, on the legal regime of homologation of services and appraisal companies.
- Order ECO/805/2003 of 27 March, published in BOE nº 85 of 9 April 2003, on rules of Real estate valuation of real estate and certain rights for certain financial purposes. It replaces and repeals the Order of November 30, 1994.
- Modification of Order ECO 805/2003 contained in the Sixth Final Provision of Royal Decree 1060/2015 on the Regulation, Supervision and Solvency of Insurance Entities.
- The previous Order is modified and complemented by Order EHA/3011/2007 of 4 October published in BOE No. 249 of October 17, 2007 and with Order EHA/564/2008 of 28 February published in BOE No. 56 of March 5, 2008.