Property valuation or real estate appraisal is a process of determining the value of a property, usually performed by a certified specialist, especially when the value is determined for tax or mortgage purposes. The process of valuation also gives a useful insight into the possible pricing of the property. Naturally, the price of a real estate is whatever the seller sets for it, but usually it reflects the value pretty well, as hardly anyone would buy a property, the price of which is substantially higher that its value. Conversely, hardly anyone would be willing to sell a property at a price that is drastically lower than its value - that would mean losing profit.
The value of a property is determined by all of its parameters imaginable - anything that may affect the usage or living conditions also affects the value. One aspect that is not included, however, is the emotional/perceptual value, e.g. the fact that the property is a heirloom, or that the neighbours are likeable. Such parameters are highly subjective and will be different for every person, which is why they cannot be taken into consideration - the valuation process tries to determine the objective value of the property.
The most widely used aspects of valuation include:
- general technical condition
- quality of building materials
- external insulation
- the number of recent repairs
- floor of an apartment in a multistorey complex
- the quality of utilities
- sewers, sanitation and general water supply
- heat supply
- parking and in-built storage facilities
- lighting, both inside and outside, as well as general beautification of the area (in Latvia, the presence of greenery is especially valued)
- sound and light pollution
- the surrounding infrastructure and facilities
- public transport stops
- any other facilities needed for a comfortable life
The time it takes to perform a property valuation mainly depends on the agency and on the difficulty of evaluating a specific real estate. The easiest for evaluation are apartments built according to a specific construction project. Then there are private houses and newer buildings, whose constructive parameters are not yet standardized or are new to Latvia. Finally, the most difficult and time-consuming to evaluate is land, especially with buildings on it. Depending on this, the process of valuation can take anywhere from 2 to 10 days.
In order to perform evaluation correctly, agencies will need certain documents. These documents allow not wasting time on determining the aforementioned parameters manually, as well as ensure that no mistakes are made during this process. Different agencies may require different document for different properties, but here is the list of the most common type of documents required:
- documents proving the ownership of the property (e.g. an excerpt from the relevant Land Book)
- technical documentation (e.g. a building plan)
- for land - a document that states the intended usage of the property
Not having this documentation may cause valuation agencies to be unable to perform their duties, some even may refuse to evaluate based on the lack of trustworthy information sources. While such cases are an exception, it is highly recommended to make sure that you have all the necessary documentation (when selling) or strongly request that the seller provides it (when buying).
As mentioned previously, the process of valuation, especially one intended for tax or mortgage purposes, must be performed by a certified valuator. The full list of certified Latvian appraisers can be found on the Latvian Association of Appraisers (LIVA) website. As of 2018, there are 114 of them. While the individual certificates are issued to natural persons, they are mostly employed in appraisal agencies, which is why the procedure itself will mostly happen as a service performed by a legal person.