How much is your property worth? It depends who's asking — and why

It's happened to me more than once: valuing the same flat twice in a single week, for two different clients, and handing over two figures that don't match. And both are right. When I explain this, people pull the same face every time — the one that suspects they're being taken for a ride. They're not. A property doesn't have a single true value waiting to be uncovered: it has several at once, and each one answers a different question.

There's one thing worth clearing up at the outset, because it's the root of almost every misunderstanding: as valuers, we don't quote prices. The price is whatever the market settles on the day contracts are signed. What we provide are values — reasoned, evidence-based estimates — and before any figure is worked out, the first decision is what the valuation is for. Change the purpose and you change the value, without either one being wrong.

One property, several values (all of them correct)

Here's the idea that makes sense of the whole thing: a value isn't a fixed feature of a building the way its floor area is. It's the answer to a question. And depending on who's asking — a bank, the tax office, an insurer, an investor, a court — the question changes, and so does the value that answers it.

In the trade this has a name: the purpose of the valuation. It isn't a formality on the first page of the report; it dictates what gets measured, by what criteria and under which rules. That's why a proper report always states, before the number itself, what it was prepared for. A value with no stated purpose means nothing.

Here's an analogy I often reach for. If you ask me how fast a car goes, the honest answer is: "what do you need to know for?" Its top speed on paper? The fastest you can legally drive it? The speed at which it sips the least fuel? Same car, three different numbers, none of them false. A property behaves in exactly the same way. Let's run through the questions people ask most often, and the value that answers each one.

Market value: the starting point

It's the best known and sits behind almost everything. Market value is the estimated amount a property would change hands for, on a given date, between a willing buyer and a willing seller — both independent, well informed and under no pressure to close — after a reasonable period on the market. All those conditions aren't there for show: each one is meant to keep the figure clean of a sale between relatives, a rushed disposal under pressure, or a buyer who didn't quite know what they were taking on.

It's the basis you use to find out what you're holding before you sell, or simply to take an informed view. And it carries a trait I described in another article: it's a value tied to a particular date, a snapshot of the market at one moment. It doesn't predict what you'll end up signing at the notary's — that comes down to the negotiation and how much of a hurry each side is in — but it gives a well-founded estimate of what the property is worth today under normal conditions. From here on, almost every other purpose is this same value seen through a different lens.

The bank's value: mortgage security

This is behind half the worried phone calls I get. "I've agreed to buy at 300,000 and the bank has valued it at 270,000 — is the valuation wrong?" Almost never. The thing is, the bank isn't asking the same question you are.

When you apply for a mortgage, the valuation has a very specific purpose: to measure the security behind the loan. The bank doesn't care what price you negotiated; it wants to know what the property itself is worth, assessed on technical criteria and comparable evidence, so it can work out how much it could recover if it ever had to repossess. Put plainly: that valuation protects the bank, not the buyer. So if you've agreed to pay more than the market evidence supports, the figure will come in below your deal — and that isn't a slip by the valuer, it's precisely the job.

It's also a tightly regulated exercise. These valuations are signed off by valuation firms approved and supervised by the Bank of Spain, under Order ECO/805/2003, and the report is valid for six months from the date it's issued. It's worth being clear about what that means, because it's often misread: it's a snapshot tied to a date, and if the deal isn't completed within that window, the valuation has to be refreshed. It does not mean the bank re-values the property every six months for the life of the mortgage. Once the loan is granted, a new valuation is only commissioned when the situation calls for it — a fresh transaction, a remortgage, a change to the loan terms — never on a rolling schedule.

Value for the tax office: inheritance, gifts and purchases

Inheriting a flat, receiving one as a gift or buying a second-hand home all carry tax consequences, and that brings in another purpose. To settle inheritance tax, gift tax or transfer tax you have to declare a value for the property — and you'll want one you can defend. These days the authorities start from their own reference value for these taxes, but that figure doesn't always fit the reality of a particular property: a home in poor condition, one that's occupied, or one with quirks the cadastral figures simply can't see, may be worth considerably less.

When that's the case, an independent valuation lets you stand behind a more realistic figure and, if the tax office disagrees, defend it through a counter-valuation by an independent expert — the route the law provides precisely to set a professional's figure against the authorities'. It isn't the most glamorous purpose, but it's one of the ones that saves the client the most money when the case justifies it.

Value before a court: when the valuation has to stand up

Once a value ends up in court, the bar rises. It happens in a divorce settlement, in an estate the heirs can't agree how to divide, in a repossession or in insolvency proceedings. Here the expert can act for one of the parties or be appointed by the court, and the report has to be ready for something that doesn't arise in an ordinary valuation: an expert for the other side picking it apart, point by point, in front of a judge.

That changes how the work is done. Reaching a reasonable figure isn't enough; every comparable, every adjustment and every assumption has to be watertight, because any weak spot is the first thing the other side will go for. The purpose doesn't so much change the type of value — it's usually still market value — as the level of rigour and defensibility the report needs in order to hold up.

The value in a forced sale

The same property is worth less if it has to be sold in a hurry. In an auction, a repossession or an insolvency there's no time to market it and no room to wait for the right buyer, and it shows: the forced-sale, or liquidation, value starts from market value and knocks off exactly what it costs to sell against the clock. Same flat, different question: "how much would we get if we had to sell it right now?"

Insurable value: what it costs to rebuild

And here's a mistake that quietly costs people money. When you insure a home, the figure that matters isn't what it's worth on the market but what it would cost to rebuild. And that has a consequence almost nobody keeps in mind: land doesn't burn. Location — the single biggest driver of market value — has no place in the insurable value, because however badly the building burns, the plot is still there.

The upshot nearly always works against the unwary owner. Insure for what you paid — land included — and you're over-insured: paying for cover you'll never claim in full. Insure for too little and you fall into under-insurance, and after a claim the insurer applies average — it pays out only in the same proportion as you were covered. Getting this figure right is one of the most worthwhile, and least glamorous, things an owner can do.

Fair value: the accounting figure

When the one asking is a company that has to carry a property in its accounts, the right figure is fair value. It shows up in balance sheets and annual accounts, when a company is bought or merged, or when assets are divided between shareholders. Its purpose is accounting: putting a faithful figure on the books for what the assets are worth.

In practice it tends to sit close to market value, since both look at an exchange under normal conditions. But the context is different — nothing is being sold, something is being reported — and the work is governed by accounting rules. Same building, different question, different report.

Investment value: what it's worth to you, and only you

This is the most misunderstood of the lot, because it isn't a "market" value at all: it's subjective, and deliberately so. Investment value is what a property is worth to one specific investor, on their own numbers: the return they require, the cost of their finance, their tax position, how long they intend to hold it, how neatly it fits what they already own.

It's clearest with a let commercial unit. To a highly geared investor chasing a strong return, that unit is worth one figure. To someone who simply wants to preserve capital and draw a steady rent, it's worth another. Same property, same market value, two investment values that may look nothing alike. It's the figure for deciding whether to buy, sell or hold; it's no use to the bank or the tax office, because it answers a question only that investor is asking.

So which is the "real" value?

None is any more real than the others. The right one is the one that matches your purpose, full stop. A flawless calculation on the wrong purpose is a technically perfect piece of work that answers the wrong question — which means it's no use, or worse, it walks you into a poor decision dressed up as rigour.

That's why, when someone calls, the first thing I ask isn't "which property?" but "what do you need it for?". A market value dropped into an insurance policy leaves the owner over-insured for years. A mortgage valuation used as the yardstick for pricing a sale can mislead more than it helps. And a value worked out for an inheritance isn't the one to put in front of an investor. The purpose isn't the small print of the instruction — it's what decides whether everything else is any use to you.

In short

A property doesn't have a single value; it has as many as there are fair questions to ask of it. Market value is the reference point, but the value for mortgage security, for an inheritance before the tax office, for the courts, for an insurance policy, for the accounts or for an investor all answer different purposes and, quite logically, produce different figures. Every one of them correct. What makes a number useful isn't how big it is, but whether its purpose fits what you need it for. Which is why the first question is always the same — and rarely the one the client expects: what for?

This article is for general information only. It is no substitute for a signed valuation report, nor does it constitute advice for a specific case; every property and every purpose calls for its own analysis.