What is an Appraisal? – Types of Appraisals

Appraisals are estimates of the value of a movable or immovable property carried out and supported by an Expert Appraiser. Said value is reflected in a monetary figure through an impartial technical opinion that determines its power of change at a certain date.

If it is a property, the value estimate takes into account the physical characteristics, use, market analysis and urban. Regarding a movable property, the physical condition, functionality and market value are taken into account.

Appraisals can be carried out on any type of property, which can be tangible or intangible furniture and real estate and can be of various types, so people can go to an Appraiser when they want to know the value of any of their assets. .

Benefits of performing appraisals

When carrying out an appraisal, a precise and detailed result will be obtained, so it will be possible to obtain the exact value of the property so that the sale can be made at a fair price, in addition, the valuations that are made are based on the characteristics of the movable and immovable property. .

These appraisals consist of a process supported by Certified Valuation Experts, so it is valid before official institutions, these experts are in charge of supervising, advising and controlling the requested assets.

There is a wide variety of appraisals that can be made to tangible and intangible assets, so the needs are covered in a personalized way thanks to the advice, reports and reports that the appraisers make. 

It is a document that has a confidential value, so the information of the owner and the movable or immovable property that is valued is safe at each stage of the appraisal, it also helps for better decision making.

Who can perform appraisals?

It is essential to understand that not everyone is qualified to carry out appraisals. Only Appraisers who have a professional degree and corresponding license are authorized to carry out these appraisals.

Hiring a Certified Appraiser can be done independently or through various institutions. However, it is crucial to ensure that the appraiser or institution chosen has fiscal support and is duly authorized.

A Valuation Expert acts as a specialized consultant and is qualified to prepare an opinion that estimates and quantifies the value of movable and immovable property. After completing the valuation, he or she will issue an appraisal with official validity, which can be used to carry out any required procedure.

According to Article 3 of the Regulations of the Federal Tax Code, the institutions authorized to carry out tax assessments include:

• The Institute of Administration and Appraisals of National Assets.
• Credit institutions.
• Public brokers with current registration with the Ministry of Economy.
• Valuation companies and/or professional appraisers.

This regulation ensures that appraisals are carried out with the standards of quality and objectivity necessary for their use in various transactions and legal processes.

When is an appraisal necessary?

Each appraisal responds to specific needs and provides critical information for decision making in various situations, ensuring that the parties involved have an objective basis for their transactions and actions. The choice of the most appropriate one should be decided by a specialist well informed of the case, together with the interested party.

1. Commercial Appraisals

• Buying or selling commercial properties: To establish a fair price in transactions involving commercial premises, offices, or industrial warehouses.
• Fusions and acquisitions: In business processes, where it is required to know the value of real estate assets.

2. Cadastral/Fiscal Appraisals

• Determination of property tax: To calculate the cadastral value of a property that influences the tax payable.
• Review of the tax assessment: When a property owner believes that his or her property has been overvalued by the tax authority.

3. Deed Appraisals

• Transfer of ownership: Required by notaries to formalize the purchase-sale or donation of a property.

4. Tax Guarantee Appraisals

• Debts to government entities: To establish the value of a property that will be used as collateral in the event of debts with the SAT, IMSS, or INFONAVIT.

5. Appraisals for Mortgage Loans (FOVISSSTE and INFONAVIT)

• Acquisition of housing: Required by banks and credit institutions to ensure that the value of the property justifies the loan.

6. Insurance Appraisals

• Hiring insurance policies: To determine the replacement value of a property, which influences coverage and premiums.

7. Value Opinions

• Internal company decisions: When a company needs an approximate value of its assets for accounting or planning purposes.
• Pre-sale negotiations: To evaluate a property before starting a formal sales process.

8. Income Assessments

• Setting rental prices: To determine a fair price in lease contracts, both for owners and tenants.

9. Testamentary Appraisals

• Division of inheritances: When it is necessary to know the value of the properties in a succession process.

10. Appraisals for Development Projects

• Planning new projects: Before investing in real estate developments, an appraisal is required to assess the profitability potential.

11. Appraisals for Litigation

• Legal disputes: In litigation cases, such as divorces or property disputes, where the value of the property must be determined for a fair resolution.

What assets can be valued?

A Certified Appraiser can carry out the inspection of any type of tangible and intangible asset, which, in other words, everything has a value that must be determined.

A wide variety of assets can be valued in different contexts and for various purposes. Asset valuation is an important process in areas such as accounting, finance, insurance, taxes and business transactions. Some of the types of assets that can be valued include:

1. Property: Properties such as land, buildings, houses and commercial premises.
2. Movable property: Physical properties that can be moved, such as vehicles, machinery, furniture, and equipment.
3. Intangible goods: Assets that do not have a tangible physical presence, such as patents, trademarks, copyrights, licenses and goodwill (intangible value associated with a company's reputation).
4. Financial investments: Stocks, bonds, investment funds and other financial instruments.
5. Business and companies: Business valuation is crucial in commercial transactions, mergers and acquisitions, financial planning, among others.
6. Inventory: Valuing a company's inventory is essential to determining the total value of goods available for sale.
7. Jewelry and valuables: Artwork, antiques, jewelry and other collectible valuables.
8. Natural resources: The valuation of resources such as minerals, oil, gas and wood.
9. Contractual rights: Valuation of contracts, agreements and contractual rights, such as leases and license agreements.

What aspects are taken into account when valuing a property?

Consider the general and particular details, the commercial value and the valuable information of the movable and immovable property.

Property

There are several factors in conducting a real estate analysis, including:

• Age of the property
• Square meters of construction
• Total area
• Quality and type of finishes
• State of conservation
• Existence of electrical installation
• Existence of hydraulic installation
• Existence of gas installation
• The location considers aspects such as the type of use, electricity, drinking water, public lighting, security, urban growth, access roads to the property and access to public transport.

Movable property

The appraisal of a movable asset is carried out by analyzing different factors, such as:

• Age of movable property
• Marketing grade and/or brand
• Maintenance provided to the asset
• Visible/invisible damage
• Plugins added to asset
• incidents/repairs
• special depreciation
• Technology

How is the value of a movable and immovable property obtained?

There are three approaches to valuationeitherno To determine the value of an asset:

• physical or direct approach: The replacement value, as of today, of the construction materials and facilities that were used is determined. This approach will assess the terrain, buildings, facilities, or demerits.
• Comparative or market approach: It is considered according to the market offer of similar properties, in the same area or similar areas. This approach uses the comparison of factors such as: the age of the property, the location and the shape, with which its value is determined.
• Income capitalization approach: A comparison is made, based on similar properties, in the area or similar areas that are for rent, to identify the value of all future income that the property will produce. The approach determines whether the income will be constant or variable and will be determined through the Capitalization Value or income.

How long are the appraisals valid?

In general, the validity of an appraisal is from six months to one year, as long as the property does not undergo modifications during the administrative procedures, and there are no different economic conditions or modifications to the assets to those in which the appraisal was carried out. appraise.

Types of Appraisals

There are different types of appraisals and the choice of the appropriate one depends on the needs and purpose of the appraisal. According to their usefulness, we can classify them into different groups:

Differences between types of appraisals

It is important to distinguish between the different types of appraisals and understand when it is appropriate to use each. Choosing the right type is critical to ensuring that the specific needs of the transaction or process in question are met.

• commercial appraisal: Mainly used to determine the market value of a property to be purchased or sold. This type of appraisal is based on analysis of recent sales of similar properties in the same area.
• Property valuation: It is mainly used for tax purposes, determining the value of a property to calculate taxes such as property tax. It is based on an analysis of the unit values of land and buildings.
• Tax guarantee appraisal: This type of appraisal is carried out to guarantee debts with government entities. Its purpose is to establish a clear value that supports the debt.
• Appraisal for mortgage loan: This appraisal is required by financial institutions before approving a loan. It ensures that the value of the property justifies the amount of the loan requested.
• Value opinion: It is not a formal appraisal, but provides an estimate of value based on market information. It is commonly used for internal decisions within a company or for negotiations prior to a sale.

Valuation process in a common or regular case

• Quotation request and approval.

In this process, the applicant goes to a notary or a private company and the purpose of the valuation is analyzed, the time and day of the expert's visit is set, and the location of the property is later verified. 

• Delivery or sending of documentation.

The applicant submits the registration history of the movable or immovable property, with which the corresponding valuation method and the approach to be used will be determined.

• Visit and photographic report.

The Certified Appraiser Expert visits the applicant to carry out the valuation and photographic report of the assets.

• report delivery

The estimated value is delivered to the applicant, together with the certified document. 

Depending on the complexity of what you want to value will be the number of days used to do it and these will be determined at the beginning of the process. The exact information on the period of time that the appraisal will take will be specified in the quote.

Tips for homeowners and buyers

• Choosing a Certified Appraiser: Do your research and select an appraiser who is certified and experienced in the type of appraisal you need. Check reviews and ask for recommendations.
• Prepare documentation: Gather all relevant documentation and any information you consider relevant. This will make the appraiser's job easier and ensure a more accurate report.
• Understanding the process: Learn about the appraisal process. Ask the appraiser what methods he or she will use and what factors he or she will consider in his or her appraisal.
• Interpreting the report: Once you receive the appraisal report, take the time to understand it. If something is unclear, do not hesitate to ask the appraiser for clarification.

What is INDAABIN?

The Institute for the Administration and Appraisal of National Assets (INDAABIN) is a public entity in Mexico, responsible for regulating and supervising the administration and appraisal of national assets. Its objective is to ensure that the appraisal processes are carried out with transparency, professionalism and in compliance with current regulations.

INDAABIN Functions

• Regulation: INDAABIN establishes the standards and procedures for the administration and valuation of national assets, ensuring that evaluations are fair and accurate.
• Training: It offers training and updating programs for personnel involved in the administration of national assets, promoting best practices and compliance with regulations.
• Supervision: It carries out periodic audits and reviews of the processes of administration and appraisal of national assets, ensuring compliance with established regulations.

Importance of INDAABIN in Appraisals
The existence of INDAABIN is essential to ensure transparency in the management of national assets. Its work helps prevent conflicts of interest and ensure that appraisals reflect the true value of assets, which is essential in the administration and disposal of state assets.

Benefits of Appraisals Supervised by INDAABIN

• Trust: Appraisals supervised by INDAABIN are more reliable, as they are subject to specific regulations and standards.
• Legal Value: An appraisal carried out under the supervision of INDAABIN is valid before the authorities related to property management.
• Consumer Protection: Ensures that both government and citizens are protected against unfair or manipulated evaluations.

Real Estate Appraisal Example

Suppose a company wants to carry out a valuation of a piece of land to assess its development potential. The process will take place in eight stages, as detailed below:

Stage 1: Reception of Application and Information Base

The company submits its valuation application, providing a number of key documents:

• A location plan of the land.
• A topographical plan showing measurements and boundaries.
• The land deeds.
• The record of land use.
• Architectural plans approved by the competent authority.

The appraiser reviews this information to ensure it is complete and appropriate for the process.

Stage 2: Identification of the Asset to be Valued

The appraiser reviews the application and the documents provided to identify the specific land to be appraised. The purpose of the appraisal is determined here, which in this case is to assess the development potential of the land. A date is set for the appraisal and an appointment is arranged for the physical inspection of the property.

Stage 3: Inspection of the Asset to be Valued

During the inspection, the appraiser examines the land and its physical characteristics, such as its shape, size, and accessibility. He or she also assesses the surroundings, taking note of the infrastructure and services available in the area, which can influence its value.

Step 4: Information Gathering

The appraiser conducts market research, gathering data on similar lots in the neighborhood. This includes analysis of pricing, permitted uses, and features of the land that could affect its value. Location and real estate market trends in the area are considered.

Stage 5: Selection of the Technical Procedure

Based on the information gathered, the appraiser selects the most appropriate technical procedures to determine the value of the land. This may include comparative market methods, cost and income analysis.

Stage 6: Calculation of Value Indicators

Selected approaches are applied to estimate the value of the land. For example, the appraiser uses the comparative approach to determine a price range based on recent sales of similar land. Value indicators are obtained that reflect the potential of the land.

Stage 7: Weighting and Obtaining the Conclusive Value

The appraiser applies a weighting to the value indicators obtained, multiplying each indicator by a percentage that reflects its relevance to the particular case. This allows for a more accurate final estimate of the value of the land.

Stage 8: Preparation of the Work and Valuation Opinion

Finally, the appraiser writes a detailed report that presents all findings, procedures used, and the final estimated value. The report is clear and accessible, aimed at people who may not be familiar with the appraisal process, ensuring that all stakeholders can understand the rationale behind the determined value.

Note

It is important to note that this is an example of a specific methodology used by INDAABIN, but there are other ways of carrying out appraisals that may vary depending on the context and specific requirements of each valuation.