Valuing a flat or a house correctly is essential to determine the price of the property, but first, we must be clear about the purpose of the valuation since the value of the property can differ greatly between the market value, cadastral value and the reconstruction value. We explain the differences.

Determining the value of a property, whether it is a house, flat or garage, can be necessary for various reasons. Whether we want to finance the purchase of a house, take out insurance, or know what taxes we will have to pay to the Treasury or the Town Hall, we will have to certify the value of the property. Even so, in each of these cases, the valuation of the property will be specific to the use made of the valuation.

Below we explain the types of valuations there are, and the factors to take into account when valuing a property:

Selling or buying a property

If you are considering selling or buying a property, it is essential that you actively participate in the valuation, and do not leave everything in the hands of the real estate agent. On the other hand, the heterogeneity of the real estate market makes it impossible to obtain a unified register that clearly reflects the sale and purchase, especially if we are referring to the second-hand market, therefore, there is no reliable data that can be used at a generalised level.

A valuation done by an approved professional guarantees, both to the buyer and the seller, that what is being asked for this property is within the market value at the time of the valuation. This is important because the value of the property can change significantly in a few months and may not be in line with the price that was being asked for the property when it was put up for sale.

Likewise, if we are buyers and require financing through a mortgage, the financial entity must ensure, through a real estate appraisal carried out by an approved appraiser, the real market value of the property in order to guarantee that, in the event of non-payment, it will be able to cover the debt. The cost of the appraisal is borne by the client regardless of whether the loan is formalised, and will also serve to establish the maximum percentage that the bank will be able to finance.

The cadastral value of the property

The cadastral value is an administrative value that is given to each property based on the data that appears in the real estate register, depending on the valuation criteria chosen by each local council. It is a fixed amount, but is updated in accordance with the annual coefficients approved by the General State Budget Law.

On the basis of the cadastral value, the amount of different municipal taxes is established, such as personal income tax, property tax, wealth tax and transfer tax, etc. This has a direct impact when calculating the amount we have to pay for the municipal capital gains tax, which calculates the increase in value of a property, if we want to sell the property. And when selling our property, we have to bear in mind that, as a general rule, the sale price can never be lower than the price reflected in the land registry.

If you want to know the cadastral value of a property, you can request this information from the electronic headquarters of the Register, from the Register Office, or by phoning your local Register office. However, the scope of the data that can be consulted will depend on whether you are the owner of the property.

Value of the cost of reconstruction

Making an estimate of the value of your property is an essential requirement if you want to take out a home insurance policy, but in this case, the value of the property is not equivalent to its market price. The insurance companies calculate the price of the policy according to the amount of money necessary to rebuild the property, in case of loss or total destruction.

Keep in mind that the Estimated Reconstruction Value (ECR) includes only the physical structure of the building, but does not include the land or contents, such as furniture or appliances. Even so, it is important to make sure that the amount of the coverage of the home is equal to the estimated reconstruction cost, to avoid having to add the difference out of your pocket in the event of a claim.

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