Property valuation, home valuation or real estate valuation is basically the process of creating an estimate of value, usually for residential or commercial real estate. Real estate deals often require valuation because they happen infrequently and each property is different, unlike stock, which are similar and often traded daily. The process involves several steps:
The first step in valuing a property is determining the land’s value. The land’s current market value is the average price per acre, or what the owner may be willing to pay for that piece of land. A land survey can also be performed to determine the land’s value. After determining the land’s market value, it is necessary to take into account factors such as the structure and location of buildings, surrounding land, and neighborhood. This information helps the buyer decide how much money they will be paying for the land, whether they should invest in the land, and whether the land is considered good enough to develop.
Once the land survey is complete, the next step is to determine the home’s value. A home’s current value is calculated by multiplying its market value with its square footage, the value of the house, and the age of the home. The more current the value of the house is, the less money the buyer will have to invest to create the home, and the lower the cost to buy.
If the home’s value is high, it is considered an investment property, which allows the seller to gain control of the property and enjoy the benefit of tax deductions. A property that has been built and is in good condition may have lower values but is still considered an investment property. In this case, the home buyer will have to put in more money in the purchase.
To determine the best value for the home, the seller will present it to a real estate agent who will work with the seller to sell the property at a profit. Because there are so many factors involved, the actual selling price will vary from person to person. Because the market values will change daily, the value is estimated by a number of people and a market expert can be hired to help complete the estimate.
There are a lot of ways to go about the real estate valuation process, but a real estate broker can be very helpful, especially when buying or selling a property. They can guide you through the process so that the transaction goes as smoothly as possible.