What You Should Know About Real Estate Valuation?

Basic Valuation Concepts

The value of a property is defined as the current worth of the future benefits arising from the ownership of the property. Real property is not like any other consumer goods as its benefits are realized over a long period of time.

Value versus cost and price - Price is the amount that someone pays for something, while cost is the actual expenditure, like on labour, materials, etc. While both can influence a property’s value, they don’t determine its value.

Market value - An appraisal is an estimate regarding the market value of a particular property. This helps to determine the most probable price that the property is going to bring in an open and competitive market.

Appraisal Methods

An accurate appraisal relies completely on methodical data collection. Specific data, general data, covering details regarding the particular property, pertaining to the nation, city, region and neighbourhood are gathered and analyzed to finalize the value.

Method 1: Sales Comparison Approach

Trusted real estate agents in Perth use this approach in valuing single-family homes and land. The value is mainly determined by comparing it with a recently sold property with similar characteristics.

Method 2: Cost Approach

This approach is used to estimate a property value that has been improved by one or more buildings. The cost approach is useful when the property being appraised is a type that doesn’t guarantee income and is not frequently sold such as churches, schools, government buildings and hospitals.

Method 3: Income capitalization approach

Also known as the income approach, this completely relies on the relationship between the net income that a property produces and the rate of return an investor needs. This method is used to determine the value of the properties that are producing income such as office buildings, shopping centres, and apartment complexes.

Hope, you have gathered enough information about real estate valuation. If you like this blog, don’t forget to share it with your friends, and get back to us for more exciting content!