An accurate evaluation for financial security
Real estate

Depending on what should you evaluate a property when you buy it. What would an authorised valuator do

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Anuța Stan

Unlike the rest of Europeans, in Romania more than 96% of us are owners, while only 2% of Romanians live in rented premises, the rest living in homes made available free of charge, according to data published by Eurostat.

Lately, there are quite a few situations where those who buy apartments or houses do not buy them for use, but "for children, for we don't know if they will be able to buy one". It may seem risky to make such an acquisition, but if apartments or houses bought "for children" are located in university centers cities and especially in areas with easy access to universities, these properties can "turn" into an investment.

Most of these properties are purchased with loans from the bank, and the guarantee is either the property to be purchased or another property already owned and with which the credit is guaranteed.

The value at which these buildings are accepted under guarantee shall be determined by an authorised valuator, member of ANEVAR, having as reference the Valuation Standards of the goods valid at the date of drawing up the valuation report.

Anuța Stan, valuator and ANEVAR accredited member, specializing in EPI – Real Estate Assessments, reveals a series of tips that help anyone to find out what the true value of a real estate is and how the valuation reports are drawn up.

What you need for the valuation  

The valuator estimates the value of the property right, which is why he needs the deeds of ownership (purchase contract, or, in the case of houses, the contract for the sale of the purchase of the land, the Building permit and the Receipt Report), the cadastral documentation and an extract of the land book, says Anuța Stan.
If you have decided to purchase an apartment in a new building, only the last act of dismantling (by which each apartment has a single cadastral number) is not enough, ask the developer or real estate agent also the history of the documents: the deed by which the land was purchased, the building permit, the minutes at the reception of the works, the completion of the tabulation and see if there is access to the real estate from a legalpoint of view. There are a few situations where, unfortunately, there is physical access to the apartment, but from a legal point of view the documents are not very clear, and in order to be able to provide it as collateral, this must be clear in the documents.
"Even though we as valuators are not legal advisers by profession, over time we understood the importance of these things and we know what we need to check in the documents of the buildings to be constituted as collateral," says Stan.

What does the merchantability of a property mean

Another aspect to consider, she believes, is the merchantability of a property. You often hear the expression "there's no market for it", for the real estate in question, especially when you want to take a loan and guarantee with a property that you have enherited, for example, but which is located in a locality in the countryside, where real estate is very rarely traded.
The term is borrowed from the "market approach", one of the 3 approaches used by valuators to estimate market value, explains the valuator.
According to her, it is the approach in which the value of the property is determined by comparing the real estate to be valued with identical or similar real estate. "So if we don't find enough information about offers to sell similar real estate or transactions (they are harder to find), the market approach cannot be applied, the conclusion being that the asset cannot be a guarantee, or more precisely 'there's no market for it," says Anuța Stan.

What do you compare with, when you value a real estate

In applying the market approach, the real estate shall be compared to similar real estates and adjustments are applied to certain comparison elements. Comparison elements are those characteristics that the market recognizes as differences in the prices paid. Some examples of such elements are those specific to the property: location, surface, age of the building, the floor on which it is located, finishes, if it has parking space, box, own thermal power plant.
It is the evaluator's proper justified reasoning, based on what the market recognizes, that analyses these elements. Some examples:
Location – it is obvious that an apartment near a park will be more attractive than an apartment located next to a former industrial enclosure;
The area – in recent years the interest in the purchase of apartments with generous areas has increased. In the case of houses, an interesting aspect is that although after 2000 houses were built with very large areas (even over 300 sqm), in recent years the interest has increased for the purchase of houses with reasonable areas, market participants realizing the very high costs of heating during the winter and their maintenance;

The age of the building – many young people prefer apartments in new buildings with larger useful areas, and in terms of age, the market divides the buildings into: built before 1977, between 1977 – 2000 and after 2000.

Parking space – has become one of the important factors in the decision to choose between an apartment that has this parking space or not – I do not think I need to elaborate on the comfort and tranquility that we "poses" a place to leave our car overnight, especially since the number of cars is constantly increasing.
In addition to property-specific elements, transaction-specific elements are also analysed when information is found about transactions that have been made with similar properties. Among them, the motivation of the parties: one party wanted to sell quickly or the other was motivated to acquire that property, aspects that can influence the price without the market value having changed. Or maybe one of the two (the seller or buyer) is a better negotiator. "Each of us knows that sometimes we have faced such situations, which can lead to a price different from the market value of that good," says Anuța Stan.

According to her, the valuator analyzes all the elements that influence the value of a property and presents them in the valuation reports.


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