Property Management

How to Estimate the Value of Your Property: A Homebuyer’s Guide

A roof above one’s head is a universal dream no matter where people are from. It is an aspiration that people enthusiastically look forward to as soon as they start saving. Given the loopholes in the housing market, it is essential to estimate the approximate value of your property before buying a house. Property value is the value of a real estate property determined by the buyer and the real estate developer after reaching a consensus. This consensus is essential to avoid incurring losses when buying that property.

Why is Property Valuation Important?

Property valuation is the only way to realize if you are in a fair deal as the sellers know that an informed buyer will never settle for inflated prices. Since property valuation equips the buyer with ample information on market value, negotiating a good deal becomes easy and effective. It also tells the buyer if he can afford the property and thus make decisions. The current market value of the property is significant if you have plans of selling the house in the future. The property should not be overpriced, which will repel other buyers; neither should it be underpriced as there are zero chances of return of investment.

Some factors that affect the value of the property

Location

The location is the prime factor one considers while buying a house. Proximity to social infrastructure increases the value. If the house is in the heart of the city or close to places of work or schools, the odds of having the property valued higher is greater.

Demand and Supply

This is one of the most significant factors that influence property value; if there are many buyers in a specific area that has a limited number of properties, the value will shoot up.

Interest Rates and the Economy

A strong economy means better job opportunities, which in turn results in better wages. This economy can financially support homebuyers who are willing to spend on their homes. But a rise in interest rates will ward off potential homebuyers with the mortgage rates they have to pay.

Aesthetics and Amenities

Everybody wants their home to be a representation of their style and taste. A home that is well designed, with aesthetics, architecture and interior design in mind, is always going to command a higher property value than properties that are not. The same goes for the amenities in the house. A house equipped with automated doors, voice controls, and swimming pools will be priced higher than the ones that are not.

There are three methods to determine the value of a property:

The Sales Comparison Method

Comparative Market Analysis (CMA) is a method where the current property is compared against others that have been recently sold or listed. It helps the homebuyer understand the market and find out if he/she is up for a fair sale. The method looks at similar properties in the same locality or market and comes up with differences in the listed price and the price of other properties. This method gives room for the buyer to compare and negotiate fairly.

The Cost Method

In Cost method, the property’s construction cost is added to the market value of the land to determine the value of the property. It merely requires the buyer to pay the price of the property along with the cost of construction. This method does not depend on current market scenarios or similar properties. Instead, it looks at the property, its components, and the land.

The Income Approach

The Income Approach method is used by investors and applied to commercial properties to determine the value based on how much income it can generate. The investor estimates how much he can profit from the property based on the Return of Rate and Net Operating Income (NOI).

Income Approach = NOI/ Rate of Return (The Rate of Return is calculated by dividing the property’s NOI with its current market value)

Estimation of property value not only helps a homebuyer seal a fair deal. It also impacts how you pay property taxes, premiums, house insurance, rent fixation, and home loan. Even if one wants to transfer the property to someone else, the stamp duty for the transfer is calculated based on the value of the property.

Author Bio

Adroit Urban Constructions is one of the leading builders in Chennai. They have several ready-to-move-in apartments in areas like Thalambur and Sholinganallur. Their flats are aesthetically built with excellent amenities and landscaped gardens.

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