Today we are going to deal with the subject of Contradictory Expert Appraisal or the "real value" of things.
This type of appraisal is made when the owner of a real estate (home, farm, commercial premises, etc.) has received a certified letter with a supplementary settlement demanding the extra payment of taxes after a sale or inheritance.
The owner has paid taxes in relation to the valuation of the property that he understands to be adequate while the Administration makes another higher valuation, generating to the new owner a tax increase to be paid, including interest for late payment.
This occurs because the regulations are not adapted to reality and mass valuation methods are used that do not adapt to crisis cycles, creating very high valuations.
Next, I am going to detail an example of professional work that I have done and that has obtained good results.
A young couple bought a house in January of 2016 that, for different reasons and circumstances, agreed a good price with the seller. Said value was declared in the public deed of sale (€101.000,00) and the corresponding patrimonial transfer taxes were paid.
Since both members of the couple were under 35 years and being the usual home with a valuation lower than €130,000.00, they were applied a reduced rate of 3.50%.
However, in May of 2016 they received a letter from the liquidation office belonging to the Tax Agency of Andalusia with a supplementary settlement in which, by valuing the home according to mass methods, based on a presentation of values outdated in times of crisis and without know the particularities and damages that the building could have, value the home in more than €181.000,00.
Therefore, they lost the right to the reduced rate of 3.50% and the tax rate of 8% of the value of the home was applied.
This meant that each of them had to enter more than € 5,500.00 and in total, a supplementary settlement of more than €11.000,00 in property transfer taxes, adding interest for late payment.
Once the documentation was received and analyzed, it was found that the Administration had applied the cadastre valuation of the house multiplied by a multiplying coefficient, without detecting that the cadastral valuations were not in line with the reality of the current real estate market.
Within the period to claim, I made the Contradictory Expert Appraisal and consisted of making a real appraisal of the dwelling using the method of calculating market value by comparison to obtain the real and objective value, in accordance with the current regulations.
This method consists of analyzing the buying and selling witnesses of similar buildings that have been carried out in nearby areas and within the 6 months prior to the issuance of the appraisal. A corrective coefficient is applied to the values according to several variables (quality, situation, etc.) and finally, when multiplied by the surface of the property, a homogenous unit value of the typical market is obtained in the municipality. This value is multiplied by the surface of the building and the real value is obtained.
For the present example, the actual valuation incorporated in the contradictory expert appraisal is €106.556,80 and is very similar to the declared value.
Once sent the contradictory expert appraisal to the Liquidating Office, it presented in August of 2016 a new complementary settlement based on an appraisal made by the Administration in which the cadastral valuation method was applied with some differences that, although objective in themselves , they still did not adapt to the specific case of the transmitted housing.
The appraiser of the liquidation office used as a price base the prices established in the Official College of Architects of Malaga for the year 2015. These prices are indicative and without distinguishing the location of the building, since it considers that the same cost would have to build on the Costa del Sol (higher standard of living, higher expenses, etc.) than any municipality in the interior with lower demand for housing.
Likewise, the value of the land was calculated with the Presentations of Values and these values do not coincide with the reality, since they were approved in 2008 at the height of the real estate bubble. The valuation of the Administration was €139.299,00.
This valuation caused that, when being superior to €130.000,00, the buyers lost the right to the reduced rate of 3,50% and the tax rate of 8% of the value of the house continued being applied to them, which would cause a new complementary liquidation of € 7,608.92 plus interest on late payment.
At this point in which the new assessment of the Administration is not accepted, the promoters expressed their desire to continue with the process to designate a third-party expert who will value the dwelling again. This third expert is chosen to assess the real value and its assessment is objective for all purposes, ending the administrative procedure regarding the valuation of the property.
The procedure of contradictory expert appraisal is extended during the year 2,017 and in July, the third expert visited the house.
In August 2,017, the appraisal of the third-party expert with the following characteristics is issued:
- Analysis of the environment, the house and the plot.
- Functional program and constructive quality.
- Use of the comparison method employed by market witnesses.
- Obtaining the homogenized unit value of the typical market.
The appraisal of the third expert offers a valuation of €123.122,30 €.
In October 2,017 and with the definitive assessment, the Liquidating Office issues a new and final supplementary liquidation in which the amount to be paid has been clearly reduced, since each member of the couple is only asked to pay a €411,88 supplement, against the sum of €5.540,91 initially estimated.
Therefore, this couple has saved more than €10.000,00 in taxes that the Administration wanted to impose unjustifiably, as has been recorded.
In conclusion, the Contradictory Expert Appraisal is a very useful tool for the citizen that, in case of complementary liquidations motivated by incorrect valuations of the Administration for patrimonial transmissions such as the sale, successions or donations, can appeal against the tax collection effort of the Administration.
At RBM Office of Architecture, we offer to help you in this type of case since we have the experience, the tools and the knowledge necessary to accompany you in the way of Contradictory Expert Appraisals.