Property valuation, real estate valuation or simply real estate valuation is the process of evaluating the worth of a specific property. Real property deals usually take place infrequently and each property is unique, whereas corporate shares, which are bought and sold daily, are similar and have the same value.
There are two types of real estate valuation, namely market value and the replacement cost basis. In most cases the valuation is done on a market value basis as this indicates the lowest possible cost at the current time. But, if the property is very old, it is advisable to use the replacement cost basis. The valuation of commercial properties are typically based on the market value basis.
A typical example of a valuation process would be when you are purchasing a used car from a dealership, where you will need to compare the price of the vehicle against the price you paid for it, the sales price of comparable used cars, and its overall value against that of a comparable brand new car. The sales price and replacement cost will help you determine whether the car is within your price range or not.
Property values will also vary based on a variety of factors such as location, size of the property, condition of the structure, location, features and so forth. This is also why property valuation is considered such a critical element in purchasing real estate.
If the property you are buying is at a greater distance from the market value, then you may not want to pay more for it than it is worth at present. Another common mistake is paying too much for an older property, if it has good condition and there are no structural defects.
Property valuation is very important for all kinds of property, but especially for commercial properties. With all the numbers that come into play, you need to know just how much the property will be worth before you buy it.
It is important to note that the more complex the property, the more complicated the calculations needed. A simple, single-story building may require several different calculations in order to put it in its proper context.
Price of commercial properties often differ depending on location. A large business building like a shopping mall would probably need a lower price than a private home or residential rental property. These differences would depend on the property’s location, the amount of potential profit and the expected returns on the property.
There are many websites available today that can provide you with a detailed appraisal of a property using current market value, to give you an idea of what the property may eventually sell for. By having the proper tools, you will be able to get a fair idea of the value of your property and be able to negotiate a fair price for it.