Real estate valuation is required for a variety of purposes, including financing, list price, investment research, property insurance, and taxation. However, determining the asking or purchase price of a piece of real estate is the most helpful use of real estate valuation for most people. It is pertinent to note that property values can fluctuate even during a lean housing market.
If you are selling your house, you would often obtain this information and other property details through a local real estate agent. A real estate professional can also help you assess the worth of your home by preparing a comparative market analysis. This value typically considers the number of bedrooms, square footage, location, and market activity. It also includes recent modifications, the condition of the house, curb appeal, or external considerations such as road noise. The sale prices of these homes will provide a solid starting point for assessing the worth of your home with adjustments made for the differences in the features listed above.
Many people engage professional appraisers to determine the market value of their homes. Professional appraisers and real estate agents utilize this procedure to determine the market value of homes. A professional home-value evaluation can help you determine how much buyers are willing to pay for your home. A comparative market analysis is not the same as an official appraisal. However, it can be a useful tool in determining the approximate worth and marketability of your home. This article will teach you the fundamental concepts and procedures of real estate valuation, particularly as they apply to sales.
Fundamental Valuation Ideas
Technically, the value of residential properties is defined as the present value of future benefits derived from ownership of the property. Unlike many consumer commodities, the benefits of real estate are often recognized over a long period of time. You can use the online tool sometimes called AVM (think “Zestimate”), or automated valuation model - to get a rough assessment of your home. Just remember, the AVM is an automated algorithm that has never been to your home for an accurate, in person inspection. Trained specialists and online valuation tools can help you better prepare to buy, sell, refinance, tap into the equity in your house, or even negotiate cheaper property taxes.
As a result, an accurate estimate value of a property must take into account economic and social trends, as well as governmental controls or regulations and environmental circumstances that may influence the four elements of value:
- Demand: The desire or demand for ownership, backed up by the financial means to fulfill that desire.
- Utility: The ability to meet the aspirations and needs of future owners.
- Scarcity: The limited availability of competing properties.
- Transferability: The ease with which property rights can be transferred.
Value Versus Cost and Price
Value is not always the same as cost or price. Actual expenditures — on materials or labor – are referred to as costs. Price, on the other hand, is the amount paid for anything. While cost and price have an impact on value, they do not determine it. A house's sales price may be $350,000, but its value may be much greater or lower. For example, if a new owner discovers a major problem in the property, such as a broken foundation, the house's worth may be lower than the purchase price.
An appraisal is a professional opinion or estimate of a property's value as of a specific date. When it comes to real estate transactions, appraisal reports are used by corporations, Government agencies, individuals, investors, and mortgage companies. An appraisal's purpose is to identify a property's fair market value, or the most likely price it would get in a competitive and open market.
The price at which a property is sold may not necessarily be indicative of its market worth. For instance, if a seller is under duress due to foreclosure, or if a private sale is held, the property may sell for less than market value.
The meticulous collecting of data is essential for a professional appraisal. To arrive at a valuation, specific data pertaining to the specific property as well as general statistics pertaining to the nation, region, city, and neighborhood in which the property is located are collected and examined. Appraisers usually use the Uniform Residential Appraisal Report and will physically measure the interior and outside of the home during an onsite visit to ensure that the public records are correct.
To determine the value of a property, a licensed appraiser may utilize one of three methods,
- Sales Comparison Approach
- Cost Approach
- Income Capitalization Approach
Mortgage lenders, investors, insurers, prospective buyers, and sellers of real estate all rely on accurate real estate valuation. While assessments are usually performed by a real estate expert, everyone involved in a real estate transaction can benefit from learning the basics of real estate valuation.
If you're ready to sell your Kent County, MD property, contact the Sutton Team at Coldwell Banker Chesapeake Real Estate. We can give you an estimate of how much you'll get when you sell your property based on current real estate market conditions, sales history, our knowledge of current market circumstances, and the specifics of your home. This also aids us in accurately pricing your home when you're ready to sell.