Real Estate Appraisal

From the real estate point of view, the evaluation of a property is a process usually required whenever the transaction of an apartment, house, shop or land is involved, for the purposes of sale, lease or within the scope of a mortgage loan.

What is the purpose of a real estate appraisal?

The real estate appraisal is required for several purposes, being mandatory in some situations:

• In a mortgage credit process for the purchase or construction of a property;
• For tax reasons, such as the equity valuation (VPT) which among other purposes, serves as the basis for calculating taxes such as IMI, IMT, etc .;
• In the context of a judicial process;
• Inheritance or sharing of properties;
• Expropriation for reasons of public utility;
• Assessment required by an insurance entity;
• Various types of transactions;
• Within the scope of an investment process;
• As part of a property valuation of an individual or company.

How is a property evaluated?

The evaluation of a real estate property can be done by several methods, among which there are the following 3:

Comparative Method - Also known as "Direct Method", "Comparison", "Synthetic" or "Empirical", it is based on knowledge of the local real estate market and the values of real estate transactions similar to those of the property being valued. This is one of the most used methods and one that inspires greater confidence, as it reflects the commercial value of the good, when subject to the law of demand and supply.

Income Method - Also known as "Analytical Method", "Income Capitalization Method", "Exploration Method" or "Indirect Method", and is used when it is possible to estimate the yield that can be obtained for a given property, having based on the current capitalization of expected net income. Together with the previous one, this is one of the most used methods in Portugal.

Cost Method - Also known as “Investment Method”, “Reproduction Cost Method”, “Replacement Cost Method” or “Replacement Cost Method”, consists of determining the value of the property through the sum of the value of the land market and all the necessary costs for the construction of a property with the same physical and functional characteristics. It is used in the valuation of rarely traded properties, such as public heritage, churches, castles, etc.

Who can make a real estate appraisal?

Real estate appraisals must be carried out by professionals - appraiser or real estate expert - with a degree in: Real Estate Management, Engineering or Architecture, or in a relevant area related to Real Estate Appraisal; experience in Real Estate Appraisals; active registration with the CMVM. They must be enrolled in the professional association and have insurance.

What data should be included in a Real Estate Appraisal

The report must contain reference to the following aspects:

1. Identification of the entity that carries out the assessment;
2. Clear identification of the object of the assessment, including photographs and description of its physical, functional characteristics, etc;
3. Purpose of the assessment, with reference to the entity or person for whom the assessment is carried out;
4. Basis and assumptions for the evaluation;
5. Date of the last visit to the property and date of the evaluation;
6. Warnings (in relation to the discrepancy between physical reality and the description in the matrix register, when there are doubts in the identification of the property or in relation to the structure and state of conservation, whenever what is evaluated is not in accordance with the current legislation, or has an impossible use to determine, when there isdoubts regarding the sources of information, the owner of the property at the time of the valuation and the conditions of lease or assignment);
7. Chosen method;
8. Justification calculation, justified error interval;
9. Value of the asset (number and words), when the valuation is on an asset that consists of different cadastral properties or fractions for the purposes of registration, the total value of the property must be given and the partial value of each of the parties constitute it (ex.Value for each fraction or parking garage);
10. Signature of the appraiser.