Mortgage valuation in Spain: what valuers check and how to maximise it

The bank valuation is the document that sets the official value of the property for mortgage purposes and, therefore, how much the bank can lend you. If the bank lends up to 80% of the valuation and the valuation is €100,000, the most it will lend you is €80,000. If the purchase price is €90,000, you have to put in the remaining €10,000 out of your own pocket, on top of the purchase costs. Understanding how the valuation works and how to maximise it is key to any financed property deal.

Who carries out the valuation and how it is commissioned

The bank valuation must be carried out by a sociedad de tasación (valuation company) approved by the Bank of Spain. The bank will suggest its partner valuation company, but you have the right to choose any approved company. For investment deals where the valuation figure is critical, it can be worth getting two informal opinions of value before commissioning the official valuation.

A valuation costs between €250 and €500 for a standard flat, depending on the company and the province. The valuation is valid for 6 months for banking purposes.

The three valuation methods the valuer uses

• The comparison method (the most widely used for homes): The valuer analyses the sale prices of similar properties in the same area (comparables). They use real transactions from the Colegio de Registradores (Spain's association of land registrars) and their own databases to establish the reference price per square metre for the area and apply it to the property being valued, with adjustments for condition, floor, orientation and specific features. It is the main method for residential property.
• The income capitalisation method (for let properties): The valuer calculates the value of the property by capitalising the market rent it could earn (or already earns, if it is let) at the market capitalisation rate. For a flat that generates €7,200/year in rent, with the market capitalising at 5.5%, the value under this method is €7,200/0.055 = €130,909. This method is relevant for land and commercial premises and can be used as a cross-check for rental flats.
• The cost method (for new builds or recent renovations): It calculates the value of the property as the cost of reproducing the building (how much it would cost to build today) plus the value of the land. It isn't usual for standard resale flats, but it can be relevant if the property has recent renovations that justify a higher value than the comparables.

The factors that push the valuer's figure up

• Excellent condition: A perfectly maintained flat, with installations in order and up-to-date finishes, can be valued up to 15-20% above one in poor condition in the same area.
• A high energy performance certificate (A or B): The rules require the valuer to take energy efficiency into account in the valuation. A property with a CEE (certificado de eficiencia energética, the energy performance certificate) rated A or B is valued more highly than one rated F or G. In older buildings, going from G to E can already improve the valuation marginally.
• A high floor with a lift and a good orientation: High floors facing south or east (or with sea or park views) are valued more highly than ground floors and north-facing homes.
• Storage unit and parking space: Especially in areas where parking is scarce, a parking space can add 5-10% to the valuation of the whole.
• A current tenancy at a market rent: A property let at a market rent (not a reduced rent) is valued as a profitable asset with proven cash flow, which the valuer reflects in the value.

The factors that push the valuer's figure down (and how to neutralise them)

• Poor condition: Visible damp, cracks, worn paintwork, old installations. The valuer notes them in the report and lowers the valuation. An informal pre-valuation before renovating can quantify exactly how much value the renovation adds.
• Outstanding planning or registered charges: The valuer checks the Nota Simple (the Land Registry extract). Uncancelled charges that appear in the report can force a more conservative valuation.
• A failed ITE or an owners' association with pending special levies: If the building has failed its Inspección Técnica de Edificios (ITE, the compulsory periodic inspection of older buildings) or has a pending special levy for building works, the valuer treats it as a liability and deducts it from the value.
• A tenancy with a rent well below the market: An old tenancy agreement with a rent at 40% of the current market creates a "haircut" in the value: the valuer capitalises the current rent, not the market rent.

The informal pre-valuation: how to know the value before commissioning the official one

Before renovating or buying, an investor can ask a valuer for an informal opinion of value (many do "desk appraisals" without visiting the property for €50-100) or use the automated valuation tools of portals such as Idealista, Fotocasa or the Bank of Spain itself. That preliminary estimate lets you know whether the renovation you're planning will be reflected in the valuation or not, before you spend the money.

Related resources: For the BRRR strategy, in which the post-renovation valuation is the mechanism for taking capital out, the article on the BRRR strategy has the full cycle. For calculating the ROI of a renovation before deciding to renovate to improve the valuation, the article on renovation ROI sets out the method. For spotting the structural and condition problems the valuer will note, the article on spotting structural problems has the full checklist.