Being in the buy sell business of real estate, it is important to know how to conduct proper property valuation. You need to know the worth of your property so you can maximize the profits when selling it. At the same time, if you know the worth of the property, you will consider the cost as well before buying one.
Note that the price of a real estate changes because of different reasons, affecting the property valuation. For example, an investment property appreciates in value over time, owing to capital growth. The value of the property will also increase after doing some renovations and remodeling. Either case, you should be in the know.
Apart from buying and selling real estate, property valuation is also necessary if you are seeking a loan and you are using the property as a collateral. Banks and financial institutions are very keen on knowing the price before they approve the borrowings.
Property valuation is also necessary when computing for the tax on the asset. These include wealth tax, municipal tax, property tax, vacant land tax, and ground rent tax, among others.
Defining Property Valuation
Technically speaking, property valuation refers to the assignment of monetary value to a real estate piece. The value of the property amounts to the agreed value from an arm’s length transaction between the buy and the seller. With this, you will want to make sure that a comprehensive review of the property valuation is being done. It is important regardless of how you will pay for the property.
In property valuation, the report details the relevant information about the piece of real estate. These include the following:
- physical condition of the building
- comparative prices for similar properties
- influence of location to the price
Property valuation, indeed, can provide you the information about the property you intend to buy. Knowing the value of the property, you will be able to negotiate better. For example, if you did a thorough property market research and it shows that the asking price is too much, you can ask for a lower quote. In addition, you will not be a victim of bogus buyers who are selling their properties at excessive prices.
What is the Automated Valuation Model?
The industry professionals are very well-versed when it comes to property valuation. It is only expected given their experience in the field. But even newbies can be in the know of property values through an automated valuation model. Under this model, the property prices are computer-generated, which is considered the cheaper option for property buyers.
The automated valuation model also incorporates mathematical or statistical modeling, which is integrated with databases of current properties and transactions. It also compares the market values of similar properties given a period.
This property valuation model is considered as more efficient and consistent than the appraisal conducted by personnel. However, the estimates may not be as accurate because the model only accounts for existing data, which may be outdated or—worse—incorrect.
How to Increase Property Value
To make money from resale of property, you have to make sure that your property is well-kept. This makes the property even more attractive in the eyes of the prospective buyers. Here are some tips on how to maintain your property.
- A simple repainting work for the interior and exterior of the property is the easiest way to make it look fresh and well-maintained.
- Ensure that the utilities, such as water and electricity, are always working.
- Protect the property from termites, especially if it is mainly built with wood.
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