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Appraisal, valuation, and expert report are present in almost all real estate transactions, but they do not mean the same thing. An official appraisal does not have the same validity as a valuation, nor do an appraiser and an expert generate the same document.
The RAE, the Royal Spanish Academy, defines appraisal as "action and effect of appraising." And if we look up appraising, "officially setting the maximum or minimum price for a commodity." If we look up valuation, it defines it as "action and effect of valuing." And the verb to value, as "to indicate the price of something." And finally, expert report leads us to expert assessment, "work or study done by an expert." And an expert is defined as an "expert or knowledgeable person in something."
Official Appraisal of your home
What is an appraisal?
A real estate appraisal is the valuation of the market price of a property at a specific time. The valuation report is prepared by a professional, usually an appraiser, following strict criteria of who can perform this valuation and what methodology to follow. In Spain, the legal regulations are included in Order ECO/805/2003, of March 27, on valuation standards for real estate and certain rights for certain financial purposes.
A mortgage appraisal is the valuation of a property so that the construction serves as collateral for a mortgage loan. Through this valuation, the lender, usually a financial institution, knows the value of the asset used as collateral for the mortgage loan and the commercial risk that the entity assumes with the mortgage transaction.
Differences between appraisal and valuation
The main difference between an appraisal and a valuation is that the valuation does not have legal value, it does not follow a procedure regulated by law. A valuation differs in the handling of value calculation techniques, which can be objective or subjective, and obtained by more or less expeditious methods. The valuation establishes the indicative value of a property, and it is possible to access an online valuation to obtain the valuation of your real estate property.
If you need a real estate valuation as a reference, or to establish a possible purchase price, you can resort to a subjective valuation. On the other hand, if the valuation report is a document needed by a lawyer, a bank to grant a mortgage loan, or, for example, the Treasury, it is necessary to request a real estate appraisal, a document with legal effects.
Differences between appraisal and expert report
The expert report is a document, usually more extensive than a real estate appraisal, which collects and explains the objective reasons why a property has a certain value. Obviously,
The difference between a real estate appraisal and an expert assessment is that the expert assessment is completely independent, without any subjective appreciation. In addition, the expert includes the process followed to reach the conclusions presented. For this reason, this document is usually much more extensive.
Summary. When to request an appraisal, when a valuation, and when an expert report?
A real estate appraisal officially sets the price of the property, based on objective and common criteria for all appraisals. You need an appraisal, among other assumptions, when you want to apply for a mortgage from a bank to buy the property. The law includes the requirement of objectivity for Appraisal Companies.
On the other hand, a valuation is a prior, subjective appreciation, without legal repercussions, on the price of a property. It will serve to have a first impression of the possible price of a property. And an expert assessment, something very different, is an objective explanation of why a property reaches a certain price, following only technical criteria. An expert report is usually used when there is a disagreement, for example during a judicial procedure.
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