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The value of the building is not estimated at the time of the inspection

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Ştefan Sabo

In a previous article I wrote about the essential steps of evaluation. Today we will focus on two of them, namely the inspection of the building and the estimation of the value.

Why did I choose this topic? Very often, the client believes that immediately after the completion of the inspection of the building, the assessor can communicate to him its value. But the process of estimating the value is a complex one, which cannot be done "on the spot".

The inspection of the real estate and the estimation of the value are two distinct stages, and the first one has a defining importance for the second. You already know that at the time of the inspection, the assessor takes the information from the field (physical characteristics of the apartment, for example, the degree of completion or age, but also the characteristics of the area where it is located), information with which he can reach the estimated value of the building. Even if the value of the real estate is not a fact, but an authorized opinion of the appraiser, we want it to always be the right one. Thus, we do not communicate a value without going through all the necessary steps for a "by the book" evaluation.

The estimation of the market value, which is one of the most common types of value (these we will discuss in the following articles) is carried out on the basis of a thorough market analysis.

Market analysis involves the identification and extraction of detailed information about real estate similar to or similar to the valued one, recently sold on the market or offered for sale. This information is critically and objectively analysed by the appraiser and the buildings with the highest degree of comparability are selected, usually 3 to 5 comparable. The prices of comparable buildings are then adjusted according to the differences between their characteristics and those of the subject building.

Adjustments to comparable prices are made by taking into account the differences between the following elements of comparison: physical characteristics (level of finishes, surface area, height regime, etc.), legal characteristics or location. For example, an apartment that is on an intermediate floor is better compared to an apartment located on the top floor (the reasons I think we all know them, we only mention problems with the insulation of the roof especially in old blocks or the lower degree of thermal comfort). Both the information taken from the inspection of the building and the entire process of estimating the value are then included in an evaluation report, the official document through which the value of the building is communicated.

Therefore, taking into account the above mentioned, the value of a building is not only estimated on the basis of the inspection of the building, but other stages are also required. Yes, it is possible that the assessor knows the area very well and can estimate an indicative value on the spot, but there are high chances that, by not respecting all the steps of the evaluation, it will not always be the correct one, which can have various consequences, such as paying a higher advance to the bank for the purchase of that property.

Rigorously following all the steps of the valuation and communicating the correct value only after a thorough analysis of the market helped us to reach today the valuation company that customers always turn to with confidence.

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