The first hurdle in selling real estate is finding its true and market value. Real estate valuation services can greatly help owners estimate and determine the correct value of the property they are trying to sell or rent. Real estate valuation services help real estate owners determine the fair and competitive value of real estate to avoid losses and mistakes.
To begin this process, a real estate appraiser inspects the property, assesses its condition, equipment and attractiveness, and determines its market value. The property valuation process has five major steps. Lists the step-by-step process of the real estate appraisal process, including:
1) Submission of real estate documents
In order to initiate the real estate valuation process, the owner must provide the valuator with real estate related legal documents for proper appraisal. These documents include sales certificates, ownership certificates, building plans / layouts, property tax receipts, land permits (if any), and more.
2) Real estate inspection
The next steps in a real estate valuation include a physical inspection by a certified valuator or engineer who performs a thorough internal and external inspection. A valuator is an experienced certified personnel who makes a physical appraisal of the property and prepares a final report based on the results. The valuator can examine the architectural style, layout, size, condition, and building quality of the property.
3) Property Measurement and Attestation
To assess the accurate property value the valuator will measure the property, cross verify with legal documents, click necessary images with a date stamp, and analyze the actual health of the property. The valuator will note down all the relevant information about the physical health of the property, legal approvals, and evaluate the property as a whole unit.
4) Property Location Assessment
Post evaluating the internal and external features of the property, the property valuator assesses mileages that the property enjoys due to its location. These aspects contribute significantly to the value of the property. Some of the major elements are the locality of the property, demand of real estate in the locality, public infrastructure, civil transport and amenities, shops, malls, offices, hospitals, and such.
5) Final Report of properties
Finally, the valuator prepares the final report. This report describes various aspects of the property. The final report will include a location description, title details, location description, plans, comparable sales, valuations, property photos, and disclaimers.
Benefits of Property Valuation service
Why Should Buyers or Sellers Choose Property Valuation Services? This service has many benefits. Property Valuation services assist sellers or buyers in the following ways:
- Estimate the actual market price of real estate.
- Create a comprehensive report on properties.
- Highlights a property asset.
- Real Estate Emphasizing Locational Benefits
- Assessing the Feasibility of Potential Future Development Projects
- Assessing Real Estate Profitability and Profitability
Methods of Valuation
A property valuator may adopt different types of valuation methods while conducting property valuation. In the majority of cases, the property valuator uses the comparative method, investment method and profits method to land up at the valuation figure. But some properties may demand for a refined analysis to add extra leeway to the devalue of the property. Below mentioned are the five methods of valuation of property:
1. Comparative Method
Also known as Inferred Analysis of property value, this methodology involves comparing the prices of the property in the same area. The final value of the property is derived based on the value of the neighboring properties. Under this method a close examination of similar buildings/ property having matching characteristics and dimensions. Commonly used, the comparative method is usually utilized while assessing the market value of a residential property.
2. Profits Method
Profits Method is commonly applied while conducting a property valuation of business property. With the help of this method market value of properties like restaurants, rental office space, mall, hotel, etc., are assessed. The valuator calculates the market value of the property by taking the consecutive three years average operating income of the business. This number is secured with the help of the profit and loss statement of the business.
3. Residual Method
This valuation method comes in handy when an investor, developer or owner is evaluating the property value for future development. The Residual Method helps in assessing the viability of the property, whether it holds potential for a development project, redevelopment project or rental purposes. Under this method, gross development cost, building cost, property builder/ developers profit, and fees are all considered while calculating the property value.
4. Contractor`s Method
The Contractor`s Method or Cost Method utilizes the replacement value of the property technique. Where Comparative Method and Profit Method fail to provide an accurate estimate of the property, then this method is employed. In this method, each component of construction, cost of each construction, up-to-date construction techniques, the value of land, and reconstruction cost are added up together. Further to arrive at the market value of the property a representative depreciation figure is deducted from the previous number to arrive at the final estimate.
5. Investment Method
The Investment Method is a practical method of assessment effectively used to fix the market value of commercial properties. The market value of the property is directly related to its income generating potential. This method provides a fair overview of converting income from an asset (both current and future) into near principal. The appraiser now applies the discounted cash flow method to take into account future cash flows generated by the property owner from the property.
Purpose of Property Valuation
Property valuation services can be availed for different types of purposes as mentioned below:
1) For Selling or Buying Property
Before hanging the `On Sale` or `For Rent` board on the property, it is essential to get it assessed and valued. The process helps to fetch the fair market price of the property and get a better understanding of the real estate market. A certified valuer will inspect, evaluate, and share the final market value considering all the factors associated with the property.
2) For Renting Purposes
If a property owner is looking to rent out his/her property, then property valuation services help in determining reasonable and competitive rent. Post receiving the final evaluation report of the property, the owner can fix the rent between 6-10% of the total market value of the property.
3) For Mortgage Purposes
When a buyer rents a property with a mortgage for the purpose of a mortgage, the valuation of the property is very important. The amount of the loan is directly related to the final valuation of the property. Various loan terms are affected by the final valuation and value of the property.
4) For Taxation Purposes
Taxes Various types of taxes are levied on real estate, including housing, commercial facilities, and land. Taxes related to such real estate include wealth tax, property tax and council tax. To pay these taxes to the government the actual worth of the property needs to be assessed to serve as a basis for tax calculation.
5) For Transfer of Property Title
In several cases, the title of the property is transferred to another person, say, a relative or legal heir. To initiate the process for transfer of property title property evaluation becomes imperative as the stamp duty is calculated as per the estimated value of the property. Hence, first, the property value is estimated and then the stamp duty is calculated to complete the transfer of property title.
6) Acquisition
Acquisition and merger cases are often heard and seen in the news, where sometimes one company takes over another company or property. In such cases, the property will be pre-assessed and the final market cost will be determined. This helps bidders or buyers create acquisition plans and track funding resources. Therefore, real estate appraisal services are not only important when buying and selling real estate, but also help determine market value for a variety of purposes.
