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What You Should Know About Real Estate Valuation

What You Should Know About Real Estate Valuation

It is usually the numbers that make a real estate more inviting to the investor other than its whole appearance. But appearance and how it was created are just some of the common factors considered for evaluating such property. A good evaluation or appraisal will define the cost of your investment. Evaluation is important before jumping into a sales deal or displaying it to the market. This can make your property expensive as it seems or may cost less but the quality is more than its worth.



A property’s value is one of the main aspects in appraising. This is the worth of the benefit of the property in the future. To determine its value, there are some elements that influence its worth, like demand of the property for financial support may be for to renovation or continuation of the investment, utility or how it can provide for the owner in the future, scarcity or the uniqueness of the property compared to others and the ease transferability of the property from one owner to another.


Value is different from cost and price because this is just factors that can affect the value of a property. Cost is the actual expenditures while the price is the amount paid for something. Value, on the other hand, is the totality of a property’s worth.  In Appraisal, a property is a judge defending on details of the property, general data like the location of the property or where it is situated. This determines the Market Value of the property. It is the most probable price of the property in the market.


Here is a list of the basic concepts of real estate valuation:


Comparables. It is the similarity of the subject property to the other. Factors to determine the value of a property comparing to the other sold properties with similar characteristics are the size of the subject property and the location. Location is very important because it is one of the biggest factors that affect the appraisal. Location pertains to its accessibility, lifestyle, and the benefit of the location to the owner itself. The age and condition of the buildings, date of sales for the benefit of the economic changes, features like a landscape, number of rooms, garage, space, a pool, or even the terms and conditions of the sale, these are also the factors needed to weigh a property’s market value.


Cost. It is the assumption that a reasonable buyer would not pay more for an existing improved property than it would cost to buy a comparable lot and construct a building that is comparable in terms of desirability and usefulness. This can greatly affect by the depreciation of a property. It is the physical deterioration of the property such as painting, roof, functions, outdated features and fixtures and number of bathrooms defending on the number bedrooms. Depreciation is deducted to the cost of construction and it lowers the market value of a property.


Income Capitalization. The rate of return an investor requires and the net income that a property produces. The productivity of the property against the investment the investor has to provide for the property affects the value of a property.

Appraisals are performed by skilled professionals, however knowledge of the things even the basics in valuation can help you understand your expectations in your investment and how you will benefit from it.


SOURCE : http://www.investopedia.com/