The value of a property is its basic worth at the time of transfer or sale. This is often determined according to many factors, including market values, neighborhood factors, previous owners, and the condition of the home.
The value of a property is not the same as its price or its selling price. The property value can be viewed as an estimate of what the home or property is really worth. Factors such as bargaining skills, market demand, and other factors can affect selling prices. Property value is, therefore, a factor in many types of real estate disputes.
Valuation Concepts: A Basic Introduction
According to technical definitions, the value of a property is the present worth of its future benefits. The benefits of real property are typically realized over a longer period of time than those of consumer goods.
An estimate of a property’s value must consider economic and social trends, governmental controls and regulations, and environmental conditions that may affect the four elements of value:
- The want or need for ownership supported by the financial resources to satisfy that desire
- The ability to satisfy the needs and desires of future owners
- A finite supply of competing properties creates scarcity
- The ease with which ownership rights can be transferred
Cost vs. Value
The value of something is not necessarily determined by its cost or price. Cost refers to actual expenditures, such as labor or materials. In contrast, price refers to what someone pays for something.
Cost and price can affect value, but they do not determine it. A house might sell for $150,000, but its value could be significantly higher or lower. The value of a house could be lower than the price if a new owner discovers a severe flaw in the house, such as a faulty foundation.
What Are Property Valuation Conflicts?
Property valuation is the process of determining a property’s value. It is sometimes called a property assessment and usually occurs in connection with a residence’s purchase and sale.
Valuation may be done by a private party, such as when a real estate company hires a property appraiser to determine the sale price of a home. When a county needs to determine the value of a home for tax purposes, it can be done by a government agent.
One or more parties can disagree with the value of a property after an appraisal has been conducted. Most often, homeowners disagree with property appraisers because the value is either too high or too low compared to the market value. A property valuation conflict can delay or even prevent a real estate sale if not resolved properly.
How Do Property Valuation Conflicts Arise?
Conflicts over property valuation can arise for a variety of reasons. Conflicts over property valuation may arise from the following sources:
- Accidental errors: Examples include listing too many or too few bedrooms; overstating or understating the size of the building; failing to list defects like pest damage, cracked foundations, or rust; and failing to identify different exemptions.
- Outright fraud: A common fraud scheme is for a mortgage or real estate company to work in tandem with a property appraiser to create a false value for the home. Both the real estate company and the appraiser may violate the law in order to gain a higher profit on the sale.
- Confusion of laws: Some jurisdictions may have different rules and procedures for valuing homes. A neighborhood five minutes away might have drastically different laws than the one where your home is located. For research purposes, an attorney may be required in such cases.
Accidental Errors
Sometimes, people disagree about a property’s value due to an inadvertent calculation error. It is possible, for instance, that the person performing the valuation calculated the square footage incorrectly or made some other unintentional error.
Identifying the error sometimes requires an expert in real estate law and property management law. By identifying and correcting the accidental mistake, an attorney can often resolve these types of valuation conflicts efficiently.
Instances of Fraud
It is not uncommon for one party to intentionally misrepresent the value of a property to gain a financial advantage over another. To protect your rights, you should consult with an experienced attorney.
Using valuation experts and the court process when necessary, an experienced real estate attorney can expose fraud, recover damages, and hopefully help you avoid them altogether.
Confusion of Laws
It may be difficult for some people to understand the laws regarding the valuation of the property. Depending on the situation, the property can be valued differently. A property sold by a private party may have a very different value than a property taken by the government through eminent domain (when the government takes property for public use).
It can be difficult to agree on a value when two or more parties cannot agree on which laws apply to the valuation in a particular situation, especially if one is not experienced in real estate law. An experienced real estate attorney can assist you in understanding the applicable valuation laws and make sure the property at issue is valued properly.
If I’m Involved in a Property Valuation Conflict, What Should I Do?
Despite the fact that a lawyer best handles valuation conflicts, there are several steps you can take to educate yourself and prepare for a potential trial. For example:
- Any records or documents from the party that performed the valuation should be reviewed. Any errors, such as an incorrect listing of an additional bedroom, should be noted. Take a close look at all the documents that have been presented to you, and ask if there are any additional records that you have yet to see.
- If your house is being valued at drastically lower or higher prices than other homes in your neighborhood, it could indicate something wrong. Consider whether your home has been modified in any way.
- Learn about the property and tax laws in your area. You may wish to familiarize the procedure for challenging a property tax bill, as well as the format for property tax proceedings.
A legal claim may be necessary if you cannot resolve the conflict through an agreement with the other party. A monetary damages award may be awarded to compensate you for economic losses caused by the dispute. Violations of state or federal criminal laws can result in criminal consequences.
What Is the Process for Resolving Property Value Disputes?
There are a number of ways to resolve property value disputes, including:
- Using a company that provides detailed property value listings as part of their consulting services
- Hiring an additional appraiser
- Obtaining court intervention (especially for title disputes)
Property value disputes may require a formal lawsuit in some cases. One party may lose profit from a sale of a home due to a violation, or one party may be unjustly enriched.
Do I Need a Lawyer to Help Resolve a Property Valuation Conflict?
If you are unsure of any legal matters pertaining to your property, it may be in your best interests to consult with a real estate lawyer. An attorney can explain how the laws in your area affect property valuation. A lawyer can provide you with expert representation during court hearings if you need to file a lawsuit or other type of legal action.
