Essential for the successful and profitable sale / purchase of a property is its market valuation. The conclusion about the value of a real estate is related to certain valuation methods. Here we will fix the most important of them.
1. The cost approach used in the valuation of special assets and in a passive market. It is used for properties for which there is little demand on the market and which are sold relatively rarely, which is why competition between potential buyers is unlikely.
The essence of the method consists in determining the individual components of the value of the property - the value of the land, the value of the buildings and the value of the external facilities.
The market comparison method is also often used here, in which similar properties located under similar market conditions are compared, with the aim of finding the market price per unit area.
2. Income approach, which is based on the theory of the value of money over time and the assumption that the value of the property is equal to the present value of future income from it.
The revenue method is often used. For the buyer of such property important is the return of investment. Real value remains in the background. This method is essential in determining the market value of properties - rental housing, commercial properties, mixed-use properties and hotels.
The investment method is also important, which is based on the principle that the annual net income from a property and its capital value are related, and that for a given income from a property or its annual value, the capital value can be obtained. The method is applicable in two directions - to determine the profitability of the property as an investment and to determine its value.
3. Market approach based on comparable sales information. Its essence consists in a direct comparison of the appraised property with similar ones that have been sold recently, the value being determined on the basis of these previous transactions. The comparison is made with similar properties located in the same area, the similar properties have similar characteristics to the appraised property and the deeds that have been concluded in the recent past. The use of this method requires an active market and that the price is not affected by urgent circumstances.
If you find it difficult to evaluate the property you are selling / buying, you can contact an appraiser or us for advice.
