Property valuation is the process of accurately estimating a property’s value. This can be of assistance to those interested in buying, selling, or investing in any form of property. Without an accurate valuation- also known as real estate valuation- buyers, sellers, lenders, and investors can be cheated out of money. There are five different methods to accurately value property. Here are the five valuation methods:
Comparison Method for Property Evaluation
This method values properties such as houses, shops, and offices by comparing them to similar recently sold properties. The estimated market value is established after analysing the properties of these similar recently sold properties.
Profits Method for Property Evaluation
This valuation method is used when there are no similar recently sold properties available for comparison. This method, typically used for large properties like hotels, values property by obtaining the divisible balance, which is the business’ working expenses subtracted from their gross profits.
Residual Method for Property Valuation
This method is used to value property that will be developed. The value is calculated by subtracting the cost of development and the developer’s profit from the gross development value. It is considered an inaccurate valuation method by many because the costs used to calculate the value are unstable and can change over time.
Contractor’s Method for Property Valuation
This property valuation method is oftentimes considered unreliable because it is based on the market value, which is constantly changing due to fluctuating supply and demand. It is used as a last resort.
Investment Method for Property Valuation
The investment property valuation method is used to determine the value of a property that will generate income over time.
Property valuation, or real estate valuation, is crucial for anyone who has any involvement in the real estate industry or owns a property. Whether you’re looking to buy a home, sell a business property, lend money to a potential buyer, or invest in a property- you need to have the property accurately valued before you make any business decisions. By using the correct method and a trusted professional, you can rest assured that your valuation is accurate
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