A property valuation may be needed for a variety of reasons, like organizing divorce settlements, but, it is particularly necessary for real estate transactions and deals.
In Cyprus, the legislation requires a fully certified property valuation when buying or selling commercial, residential, or agricultural properties. I’ll tell you more about this later.
Here’s what you need to know first.
A real estate valuation is a detailed assessment of how a property’s value is determined based on its location, type, size, and various other factors.
The valuation is conducted by a professional surveyor who will do the appraisal on-site, take notes and photos, and then provide you with a valuation report.
In Cyprus, the most common reasons why you would need a property valued in the real estate segment are as follows:
For example, for a 2-Bedroom Apartment valued at 130,000€, you should collect yearly rent of at least 7,800€ (which is 6% of the valuation price). That can be split into 12 monthly rents of 650€, or, for shorter periods, calculate it by the number of months required.
Other reasons why someone may need a property valuation in Cyprus are if accounting departments request it, for divisions of property, divorce proceedings, and property exchanges.
As it seems, different types of property valuations are estimated through various methods, depending on the reason why you might need one.
Here are the most common types of property valuations used in the real estate sector in Cyprus.
A property valuation is requested by a bank or a financial lender as part of their risk assessment in the process of you obtaining a mortgage or a loan from them.
The valuation helps the bank decide what sum to lend you that can be quickly recovered if you default on your payments and they repossess and sell your property.
The bank will use its own property valuer for the process, which will usually assess the condition of the building’s structure and if the building has any faults. Upgrades and renovations will also be taken into consideration, as well as the location of the property and the local government zoning.
This kind of valuation often estimates a lower property value, because the bank will only look to recover the sum of money they have lent you.
A market valuation establishes a reasonable and acceptable selling price for a property in an open and competitive real estate market. It is a valuation required when buying or selling real estate, or when you consider renting.
To determine a fair value that can serve as a starting point for negotiations over the final selling price of a property, a market valuation is obtained by researching sales of similar properties in the area at a certain time.
The market value of a property will always be higher than a bank valuation, but the actual selling price of the property might differ from the market valuation. Due to subjectivity and emotion on both sides, or duress and pressure because of a foreclosure, the property might sell above or below its market value.
An Investment Valuation determines the actual and the projected value of a real estate property or a company. This type of valuation is obtained by looking at the enterprise’s shares, assets, the likelihood of future earnings, and market value, among other metrics.
Potential investors often acquire an investment value appraisal when they decide to invest in real estate and have certain investment goals in mind because it helps them make intelligent decisions and develop strategic development plans.
A thoroughly made investment valuation is important for inventors because they need it to pitch the viability of their business and allows them to foresee if the returns on investment are favorable.
A property’s investment value can be lower or higher than its market value. It is a reflection of the property's potential worth based on its current condition and the investor’s goals rather than depending on a free market's supply and demand forces.
Other types of property valuations include:
Insurance valuations - a detailed valuation is needed to establish the insurance value of your property in case it gets destroyed and the restoration will cost more than the current average market construction prices.