Property valuation is a simple yet critical process of determining the value of a property. Valuing the property involves comparing current market prices of similar properties in the area to the property being appraised in order to determine an accurate value. Property valuation can be confusing and many people do not fully understand it, especially those who are not experienced in real estate, but it is an essential step when purchasing any property.
There are many types of property valuation. These include market valuation, income valuation, replacement cost valuation, property comparison valuation, income and price correlation analysis and land value valuation. Market valuation, property valuation or property appraisal is the procedure of developing an estimate of value for a property by considering similar properties that have recently been sold. Most real estate transactions involve several appraisals as they happen infrequently and each property is unique, much like corporate shares, which are essentially the same and only trade infrequently. While these methods are commonly used, they are not considered ideal and need to be modified to meet the unique requirements of each situation.
Income valuation methods most often use income from rents and other common sources to determine the property’s value. Market value on the other hand relies on property prices that are generally consistent with surrounding properties in the same region. Both methods use similar formulas and often the method that are used will be the one that best fits the property’s selling conditions. Valuations should be performed based on realistic expectations.
Replacement cost valuation uses the replacement cost of the property to estimate the property’s current value. It also includes the replacement cost of other property that was damaged or destroyed in the process of the sale. Comparable properties are also taken into consideration. This is done by examining the construction materials, furniture, appliances and other factors that were installed in the property when it was sold.
Property appraisal services use a variety of different methods to arrive at the property’s value. These include historical sales data, market surveys and property values offered through public records. Comparable properties are also important and should be studied closely to see if there has been any significant changes since the last appraisal. One of the most popular methods of valuation is to compare similar property to that of the property being appraised. This helps to ensure that the property’s true worth is determined. Comparable properties can be found in nearby areas, on similar types of structures and with similar general conditions.
The property valuation that is done will help to determine the property’s value and assist in making any necessary repairs that may become necessary. It is also important to look at the overall condition of the property before listing it for sale. If there are major repairs needed that could increase the property’s value, it is advisable to make the repairs prior to listing the property and wait to collect the fee. This will avoid any unexpected surprises.