Approximating the worth of real estate property is significant to a selection of endeavors counting real estate financing, investment analysis, listing the estate for sale, taxation of real property & property insurance. For many people, asking or determining the buying price of a real property is the main & useful claim of the real estate valuation.
Despite many consumer goods which are quickly used, benefits of real estate are generally apprehended over times. Therefore, an estimation of a property’s worth must take into deliberation social and economic trends, in addition to governmental regulations or controls & environmental conditions that might influence these four elements of valuing:
1. Demand – The need or desire for ownership held by financial means to gratify the desire;
2. Utility – An ability to satisfy prospective owners’ needs and desires;
3. Scarcity – The limited supply of rival properties &
4. Transferability – Ease with which owner rights are transferred.
The basic concepts and methods of determining a property’s value are given below:
Sales Comparison Method
With the intention of determining the value of any property, the Property Evaluator must first be acquainted with what properties have been sold, & for how much they have been sold for in recent market. As a result of maintaining a record of real estate dealings one can get to the property’s value by analyzing sales of equivalent properties. This is a sales comparison approach towards property valuation.
This method of evaluating property is rooted on what it would charge today to construct an identical structure of a property. But if the property’s not new, then we must also decide how much the construction has lost worth over time (i.e. depreciated). The price of the original land must be determined.
This method is favored when assessing income-producing commercial and rental property. The sum of property revenue will come if it was rented as a store, apartments, or as office building. Concern is given to working expenses, insurance, taxes, maintenance costs, & the profit or return that could be sensibly expected on that property.
Mass Appraisal Method
There are basically two types of appraisal: mass appraisal and fee appraisal. Both the types utilize the similar basic appraisal theories and principles. The fee appraisal consists of those methods in which only one package of property is valued at a time. On the other hand, mass appraisal ascertain value of the whole County where market area, subdivisions, neighborhoods, & large groupings of same properties are evaluated at one go by adopting usual techniques & using uniform rates with the intention that resultant appraised value is impartial for all properties in an acceptable numerical deviation.
Appraisals are needed for the reason that compared to, like, corporate stock, real property transactions occur very uncommonly. Not only that, every property is dissimilar from the next, the factor that doesn’t affect assets like the corporate stocks. In addition, all properties diverge in their location – an important issue in their value. As a result a centralized setting can’t exist for the trade of property assets, as it exists in trade corporate market (stock exchange). This product type difference & lack of recurrent trading, unlike stock exchange, means that specialist skilled appraisers are desired to advise for valuing a property. The evaluator usually makes available a written statement on the valuation to the client. This report is used as the base for mortgage loans, settling divorces and estates, tax matters, and many others. Sometimes these reports are used by both the parties to settle the sale rate of the property evaluated.
Property Appraiser or Valuer
In some areas, the appraiser does not require a license or certification to appraise a property. Usually, though, most regions or countries require that the appraisals are done by a certified or licensed appraiser (known as land valuer or property valuer in number of countries & in British English known as “valuation surveyor”). If appraiser’s opinion is given on market value, in that case it also must be given on the basis of the best and the highest use of the property. For mortgage valuation of improved residential properties in many countries, the appraisal is often reported on uniform form. Appraisal of more multifaceted property (like, income producing or raw land) is more often than not reported in narrative appraisal report.
A Property Appraiser isn’t a Tax Collector, & the Property Appraiser does not have anything to bother with the sum total of taxes collected. Being a property owner, on the other hand, one should not merely be paying attention at what value the Appraiser places on the property, but also how will the amount of tax to be paid is determined.
Thus, before purchasing a real estate property, one should consider various factors that trigger the value of the property which is a very important factor for the whole transaction.