A technical valuation is not a number. It is a documented line of reasoning that connects the property, the purpose of the valuation and the method chosen. When the method fits and the assumptions are written down, the figure withstands challenge. When it does not, the report is only an opinion with formatting.
This article is the practical companion to Is a property valuation the same as a bank valuation?: there we explain why the figures diverge; here we explain how each figure is reached and what to check before disputing it.
1. Comparison table of the methods
| Sales comparison | Income approach | Cost approach | |
|---|---|---|---|
| Question it answers | What has the market paid for equivalent property? | What value does the income this asset produces justify? | What would it cost to replace this property today? |
| Fits well | Ordinary housing, apartments, houses in areas with transactions | Shops, offices, income buildings, licensed short-term rentals | Special-purpose buildings, plant, recent stock with no comparable market |
| Fits badly | Atypical property, estates, unique assets | Vacant property, owner occupation, unsustainable rents | Ordinary second-hand housing, where it systematically overstates |
| Critical input | Completed transactions, not listings | Sustainable net rent and capitalisation rate | Replacement cost and physical and functional depreciation |
| Most common error | Comparables from a different area, condition or period, with no explained adjustments | A capitalisation rate chosen without justifying the asset's risk | Ignoring functional depreciation and obsolescence |
| Sensitivity | Medium. It depends on the sample | High. A 0.5-point move in the rate shifts value more than almost any works | Medium. It depends on the unit cost adopted |
| Evidence to require in the report | A comparables table with date, area, condition and adjustment | Rent schedule, outgoings and reasoning for the rate | Replacement budget and depreciation criteria |
In practice the methods rarely agree. What marks out a sound report is not agreement but reconciliation: the written explanation of the weight given to each method and the reason for that choice.
2. How the method is chosen
The choice follows from the asset and the purpose, in this order:
- Does the property produce sustainable income? If so, the income approach leads and comparison acts as a check.
- Are there verifiable equivalent transactions? If so, sales comparison leads.
- Neither? The cost approach leads, with depreciation set out line by line.
- Is the purpose prudential (mortgage security)? The most conservative basis applies and unlicensed works are disregarded.
3. What a defensible report always contains
- Registry and tax identification, with use permit and approved drawings.
- Inspection with dated photographs and confirmation of measured areas.
- The source of every comparable, with transaction date and justified adjustments.
- The lead method identified, control methods and a written reconciliation.
- Assumptions and limitations, including whatever was not verified.
- The valuation date and how long the conclusion holds.
4. Review checklist
Before requesting a review, work through this list. Every point backed by a document is an argument; every point without one is an opinion.
Areas and identification
- The private gross area used matches the property register and the approved drawings.
- The unit, floor level and outbuildings are correctly identified.
- Yards, terraces and parking were counted on the right basis.
Comparables
- They are completed transactions, not current listings.
- Same area, type, condition and period.
- Adjustments for floor area, level, views and condition are explained.
Condition and works
- Recent works documented with invoices, drawings and before-and-after photographs.
- Replacement of roofs, windows, services or waterproofing is dated.
- Energy certificate up to date.
Legality
- There is no discrepancy between what is built and what is licensed.
- Each extension phase holds valid title.
- Any regularisation in progress is evidenced.
Income, where applicable
- Current tenancy agreements, with rent actually received.
- Outgoings, vacancy rate and maintenance quantified.
- Capitalisation rate benchmarked against transactions in similar assets.
Assumptions
- Was an access limitation assumed that can now be removed.
- Is any document missing at the valuation date now available.
A request for review only works with new evidence. Disagreeing with a figure, without documentary proof, does not change reports.
5. In Madeira, three factors weigh more
- Slope and accessibility. Adjoining plots of identical area can carry very different construction costs because of retaining works, rock excavation and machinery access.
- Views and their permanence. The value of a view is real and measurable, but it requires checking what may be built downhill.
- Legality accumulated in phases. Outbuildings, roofed terraces and extensions need valid title before they can be valued.
Closing note
Choosing the method is a technical decision, not a preference. Documenting that choice is what turns an estimate into a valuation. It is also what allows the process to be reopened, when needed, with evidence rather than disagreement.