The Comprehensive Guide To International Real Estate Appraisals
COVID-19 may have disrupted and impacted several industries, but with the world now moving away from the pandemic, economies are slowly recovering to their normal state. The short-term impact on investments may have been tough, but several businesses are now reporting positive numbers.
The pandemic impacted the real estate market worldwide, but industry estimates suggest that real estate is expected to generate a revenue of USD 4,263 billion by 2025. Rapid development and enhanced income levels in developing countries and developed nations are helping the real estate business flourish.
However, investing or buying real estate in different parts of the world can be challenging. The rules and regulations differ among countries and states, each having its own policies and guidelines.
The valuation of each property may differ accordingly, and so it takes a professional real estate appraiser to help you make informed decisions. Although the valuation methods are quite similar, investors must consider a few rules when investing in a foreign country’s real estate market.
So without further ado, let us understand the best practices and the international appraisal process when it comes to real estate –
Real Estate Appraisals Around The World
Value is everywhere but only the experts know how to estimate it correctly. Each country has regulations and practices to appraise large-scale properties, real estate, and businesses. In most developed nations like the United States, the United Kingdom, Canada, Europe, and others, appraisal systems require investments to be declared in the local standards.
This requires a complex process, as appraisals around the world have different languages and systems. For example, the appraisal process in the United States and Central America may be similar, but language barriers exist. Investing in Costa Rita, for example, usually happens in their local language, Spanish, while the United States requires the documents in English.
Worldwide, the factors that affect real estate appraisals are similar. The international appraisal process for real estate follows a similar process –
- Location of the property: A key factor considered in any real estate appraisal is the locality and location. The valuation usually works on a particular metric, e.g., X amount per sq ft. This rate is fixed depending on the ongoing rate of properties in that locality at the valuation time.
- Size of the property: Size of the property could also impact the valuation, as some properties could be multiple storeys or with differing rates, like usable area vs. overall property area.
- Type of real estate: The valuation of the real estate changes depending on the type of property, whether commercial, residential or any other usage type that it comes under.
- Local taxes on real estate: Taxes on properties worldwide differ and need to be considered, especially for international appraisals.
- Amenities and other factors: In addition to the above-mentioned factors, additional factors like the amenities or features also come into play and impact the final real estate valuation.
Challenges With Real Estate Appraisals
As we mentioned earlier, the valuation methods around the world might follow a similar guideline, but several challenges need to be considered. Some of these are –
- Local Rules & Regulations: Valuation methods need to follow guidelines and procedures that are different in several countries. For example, using local professionals for valuation might help, say, a country like Mexico, but their expertise is limited to their geography.
Real estate valuations that have an international criterion need to be valued with local knowledge. Still, the final output has to be shared as per the requirements of the property owner’s location. If the said owner is in the US, the valuation also needs to meet US regulatory guidelines.
- Ownership rights: In most countries, ownership rights follow unique guidelines, and property evaluators need to know this. For example, in countries like UAE, the business property needs 50-50 ownership with one partner being of local origin. Real estate valuations need to factor in this requirement.
- Local language barriers: Depending on the country where the property is located, the real estate appraisal will mitigate the language barrier. For example, if a US citizen has a property in France, the appraiser will have to perform his process with the French laws and regulations, which will be in French. However, when he reports to his client, the documents will have to be in English. Thus, international appraisal processes also need to factor in the local language factor.
- Currency fluctuations: Every local valuation will be done as per the currency in that country. The property value is subject to change depending on the currency and fluctuation in the market. For example, even if both countries follow the same medium or language for their process, the currency may vary. This means the calculation will need to be done at the time of the valuation and fluctuate periodically. This conversion often offers a big challenge to the appraiser, who needs to conform with the jurisdiction standards they are based in.
The real estate appraisal industry worldwide may follow a similar protocol and often have to interact with markets beyond their region of expertise. However, one needs to take into consideration the factors that will impact the international appraisal process.
Several factors may not conform to your own system’s requirements, be it local customs, language, financial instruments, or other systems. However, investing in growing real estate markets has its benefits and can provide huge returns if planned appropriately.
We hope these tips have been useful. If you are considering investing in real estate or property internationally, do not forget to get the right appraisal services to help you make the most informed choice!