Property valuation to get a mortgage in Spain

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The appraisal of the acquired property is the important step towards obtaining a mortgage in Spain. Our expert points out the pitfalls of this process.

If you are applying for a mortgage, you are obliged to get an official property valuation. It is carried out by official appraisers known as “tasador”, registered at the Banco de España. Only their appraisal is accepted by Spanish banks, courts and the Real Estate Registry. However, potential mortgage buyers are often very disappointed with the results of such an assessment.

The amount called by appraisers is often significantly different from the current market value of a dwelling.  Statistics says that on average, the amount they name is 98.5% of the real amount. But in fact, because of the COVID-19 pandemic prices are fluctuating. And for the uncertain development of the situation surveyors often value a dwelling 20% below market appraisal.

Why is this happening?

One of the reasons for the discrepancy is the very strict conditions in which Spanish appraisers work.  The methodology by which they should estimate the value of real estate is established by the Bank of Spain.  More than once, experts have said that these rules are aimed rather at exercising financial control over transactions than at ensuring the accuracy and relevance of the assessment being carried out.

What should the potential mortgage borrower bear in mind?

Among the reasons why the value of real estate according to the results of the appraisal is lower than its real value, I have regularly seen the following cases:

–     Proximity to the coastal zone.

This clause is subject to the law on coasts, appraisers are required to reduce the value of objects.  The percentage of decline will depend on how close the area is to the coast.  It can go up to 10%, and in monetary terms – up to several tens of thousands of euros.

–    Differences arise in the appraisal of real estate equipped with terraces.

On this occasion, the Cadastre contains only a formal explanation.  In practice, appraisers work as follows: if the area of the terrace is more than 15% of the area of the apartment, the cost of the terrace is estimated based on the construction price plus a number of other expenses (architect’s services, obtaining a license, etc.).  If its area is less than 15%, then it is estimated as a percentage of the price of the apartment.

The inaccuracy of the assessment is largely due to the need to resort to comparative analysis.  The difficulty arises also due to the fact that the description of the terrace in the Cadastre is rather vague.  The Cadastre says: fully enclosed terraces and a porch are included at the rate of 50% of their area if they are enclosed by walls on three sides.  If they are closed on one or both sides, they are not included in the assessment.  If there is a retractable roof above the terrace, the area of the terrace is not taken into account if the roof is folded more than 75%.

–    Another important point: having received a certain amount at which real estate is valued, official appraisers then reduce it by 15%.

It is believed that this total amount that the bank will eventually receive when it pays all the costs associated with the registration of the mortgage.

– Also in some cases the constructed space (in square meters) doesn’t coincide with the registered square meters.

The surveyor can only value what is registered and this can greatly influence the valuation.

Let’s take the case of a finca in the countryside. For example, the owner has done refurbishments and has added a building or extension to the plot and this has not been properly registered at the land registry or this has been executed without the proper license. In this case the surveyor can not include this in the value of the Property.

The consequence is that the value of the Property will be lower, or the owner has to solve this with the town hall or land registry.

Robin Christiani


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