Understanding Real Estate Valuation, Taxes, and Property Value

Posted on Feb 11, 2025 in Business Administration and Management (BAM)

Rateable Value: The assessed value of a property used for property tax collection.

Valuation: The process of determining the monetary value of a property, subject to regulations.

Real Property: Immovable property such as land, buildings, and constructions.

Well Root: A broad category of goods, including various types of real estate (<http://es.mimi.hu/economia/categorias.html>).

Real Estate Taxes

  • ISR (Income Tax): Paid on buildings and vacant lots; collected by notaries.
  • VAT (Value Added Tax): Levied at 16% on commercial property, but 0% on housing; land is exempt.
  • ISAI (Property Acquisition Tax): A local tax (less than 5% of property value) collected by notaries.
  • Property Taxes: Local taxes calculated based on the square meterage (m2) of land and construction.

Key Real Estate Concepts

Public Record of Ownership: A government institution that publishes property transactions, such as purchases and ownership limitations, providing non-encumbrance certificates.

Lien: A charge on property, recorded in the public registry, including mortgages, bonds, and levies.

Notary: A professional who handles purchases, wills, inheritances, gifts, powers of attorney, civil and commercial societies, and attests to facts.

Regulatory Bodies

  • CNB (National Banking Commission): Monitors banking system compliance and oversees foreign bank branches, imposing fines.
  • CNV (National Securities Commission): Regulates stock exchanges and foreign exchange operations.
  • CABIN (National Appraiser’s Commission): Oversees appraisal practices for domestic goods, seized property, and government donations, estimating severance affectations.
  • Ministry of Finance: Collects and administers local taxes, preparing the financial code.
  • Treasurer: Collects, finds, determines, notifies, and collects taxes.
  • Sub-Treasuries of the Land Register: Records property and performs updates.

Classes of Securities

  • Physical or Direct: Monetary value of a property related to labor, materials, and equipment.
  • Reinstatement: Value at current prices to replace a building in its original condition.
  • Net Replacement: New replacement value, minus depreciation.
  • Cap: Present value of future benefits.
  • Market: Value set by supply and demand.
  • Commercial: Highest values resulting from physical, market, and capitalization factors.

Factors Influencing Property Value

  • Land: Location, topography, availability of services.
  • Construction: Quality, durability, functionality, style, and aesthetics.
  • Other: Property use, economic trends, and government policies.

Factors That Change Real Estate Value

  • Demerit or depreciation
  • Economic obsolescence
  • Functional obsolescence
  • Physical deterioration

Depreciation is caused by physical deterioration, functional obsolescence, and economic obsolescence.

Economic Obsolescence: Affects entire neighborhoods, changing the best use of a property.

Functional Obsolescence: Affects construction, distribution, decoration, lack of garages, small windows, or poor project design.

Purpose of an Appraisal

  • Cadastre: Determining property tax amounts.
  • Notary: Paying taxes such as VAT, income tax, and ISAI for buyers and sellers.
  • Building Administrators: Establishing income per m2 of buildings.
  • Bank: Calculating tax assets.
  • Insurance: Setting insurance premiums.

Key Terms

  • Cost: The amount of money needed to construct a building.
  • Value: The amount of money deemed payable for a property on the market.
  • Price: The amount of money actually paid for the property.
  • Mortgage Lending: Credit provided by a bank secured by property, requiring valuation to confirm the loan amount.