A Step-by-Step Guide to Property Valuation


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It’s necessary to estimate the value of the property. There are many reasons you may need to get the value of your property and these include property insurance, investment analysis, sales listing, and taxation. Many people don’t know how to go about determining the value of their property, and this often leads to misleading estimations that cannot be used in place of serious transactions like taxation. To show you how to go about property valuation, here is a comprehensive guide to all the facts you need to know.

Basic Valuation Concepts

There are few basic valuation concepts that you need to understand.

See what they mean below.

Value

The value of a property is the present worth of future benefits that arise due to the ownership of the property. While estimating the value of a property, it’s necessary to include governmental controls, economic and social trends, because these are some of the conditions likely to influence the demand, utility, scarcity, and transferability of the property. The value may not necessarily be the cost or amount of the price, but it could include actual expenditures put into the project. For example, you may need to account for money used on materials and labor when calculating the value of a property.

Market Value

Market value shows the value of the property as of a certain date. Businesses use appraisal reports to make decisions about real estate transactions, and the goal of the appraisal is usually to reveal the real value of the property as at a specific date. As you will learn from Property Valuers Sydney, the market value is basically what the property would probably fetch if placed in a competitive market.

 

However, market value, what the property sells at, may not be representative of the real value of the property because some sellers may quote a higher price or lower than the exact value of the property. For example, when the seller is threatened with a foreclosure, they will make a decision based on the duress placed upon them, and this may lead them to sell at a price lower than the real value.

Cost Approach to Valuation

The cost approach of valuation takes into account the land on which the property sits, the cost of putting up the property, and any depreciation it might have accumulated. These values are put together to calculate the value of the property. The cost of a building can be estimated in a number of ways including using the square-foot approach in which the square foot of a completed building is multiplied by all the square feet covering the entire building. You could also use the unit-in-place method that relies on the cost of construction using individual components like materials and labor. Lastly, you may use the quantity-survey method in which you calculate the number of materials, it would take, to replace the building.

Understanding how to calculate the value of your property will help you in many instances. You need to calculate the correct value of your property so as to know how much you need to pay in taxes, and you could also get a picture of what you would make if you put the property in the market for competitive bidding.


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