Property valuation is at the core of the property selling process. It is important for everyone involved in the buying and selling of property to know how much the property being sold is worth from the very start. This is to help you negotiate a fair asking price and for the buyer to grasp the current state of the local market.
What is Property Valuation?
Property Valuation or appraisal is the process of determining the worth of a property whether land, buildings or other properties.
A person may need property valuation if they want to sell or purchase a property or rent or let out a property. Property Valuation is also important to secure a loan or for taxation purposes.
Estimating the worth of a property requires the experience and expertise of a valuer. A valuer is a professional whose job is to determine and say how much a property is worth.
Processes Involved In Property Valuation
We will look at an instance where an investor is seeking to sell his house.
Looking for a professional Valuer
Before the asking price is fixed, the owner would look for a professional valuer to determine the market value of his house and present the documents of the property to him.
Inspection of Property
The valuer will visit the house and conduct an external and internal inspection, taking pictures and even asking the owner questions about the property. The valuer will evaluate the land component of the property, which can make up a significant proportion of the property’s total value.
The valuer will also assess the size, shape, aspect, and topography of the land as well as the zoning and development potential. Inside the property, the valuer will measure the size of the building and take note of the number and type of rooms, the property’s age and condition, its fixtures and fittings, its design and layout, and any unique characteristics that could affect the value.
Interestingly, valuers look at many of the same things that a prospective home buyer would look for when assessing a potential purchase. The reason is that overall home buyers make up the majority of the market for real estate and therefore play a major role in determining “market value”.
Determine the value of the property
The Valuer would also compare the property with other properties in the neighborhood that has been sold currently. He would then use his expertise to determine the value of the house.
Factors that are Consider In Property Valuations
- Location of the building: First, the value of your building is based on where it is located. Different neighborhoods affects the value of a building. The neighborhood’s value is based on multiple factors including its crime rate, how close it is to schools, shopping centres, and access or transportation to and from the home. Also, comparable prices of homes up for sale or recently sold in the area is also considered. Values of houses in urban areas can go down based on vacant lots or condemned properties in the vicinity, and pricing in rural areas can decline depending on road access and land use nearby. The location of your building, therefore, goes a long to affect the value of your property.
- Structural Construction Materials and Updates: Construction materials used to build the foundation of your home is considered as important in appraising your home. A house built recently with modern materials, or updated to use modern materials will hold a higher value than a home that hasn’t been updated since it was originally built decades ago. Changing or updating other materials like the roof, windows will also add to your home appraisal value because they improve the overall efficiency and safety of the structure of the home.
- Age of the Home: How long your building has lasted will also be a factor in its appraisal value. This does not mean that a newer home, for instance, would always have a higher value than an older one. However, new homes that were built within the last 10 to 20 years are less likely to have major issues, so there’s lower risk in buying them. This will, therefore, increase the home appraisal value. Older homes that are located in historic districts or have been maintained very well for decades will also have a high appraisal. This means that new buildings that are poorly built and show signs of weakness would have a low value. An old building too that has not been properly taken care of would also have a low value.
- Number of Bedrooms: The number of bedrooms in your home has will also increase your home appraisal value. The home appraiser will compare your home to other homes in the area with the same number of bedrooms to make a value comparison.
- Recent Home Renovations: If the home has undergone large home renovations since the last time it was appraised, this will also contribute to the home appraisal value. Newly updated kitchens and bathrooms hold a lot of value in today’s market, so an appraiser will take these renovations into consideration when determining the value of your home. Before putting your home on the market, choosing high impact areas of your home to renovate could have large returns on the appraisal value of your home.
- The Current Real Estate Market: Finally, the current real estate market has a large influence on how your home is appraised. Homes appraised during a time where there’s a market that’s saturated with many buyers and not enough inventory to accommodate all of them will be appraised higher. On the other hand, your home appraisal value during a market that’s saturated with many homes and little buyers will be appraised lower.
Why You Must Value Your House Right after Building
It is very important to value your house right after building. The reasons include the following;
- Price Setting: Firstly, Property Valuation helps you know the value of your house so as to determine the selling price for it. It gives you a trained professional’s point of view on the fair market value of the home. This helps the seller to set a price for the home that is in line with the value of the house. This is to avoid pricing your house too below or way above its original value.
- Helps Home Buyers: Knowing the value of a home also helps buyers to ensure that the money they are paying for the house is proportional to the value of the house. This is necessary to prevent being cheated or paying too low for a property. It also educates them on the state of the local market.
- Securing Loans: Valuations are most often used by lenders to determine the value of the assets being used as security for a loan. This means that when securing a loan, the value of your house would be required to ensure that it is worthy to be used as a collateral. Also, the value of your building is also needed to calculate how much the bank or lenders are willing to lend. So valuing your house right after building would make the process of securing a loan faster as you would have all the necessary details needed to calculate the amount that can be lent to you and whether you can use your home as a collateral or not.
- Knowledge: Valuing your home helps you know the value of your building. It also opens you up to certain factors that affect the value of a building. With such knowledge, you can readily improve your old building or work on future buildings in such a way as to increase its value according to the state of the local market.