Learning About Real Estate Valuation

Reckoning the value of real estate property is valuable for a variety of undertakings, including listing real estate for sale, real estate financing, investment analysis, insurance and taxation.

What is valuation concepts: for appraising the main consideration is to decide the property’s value. It is mainly for considering the worth of future prospects which would arise from that real estate. Consumer goods that are quickly used up are generally benefiting for a longer period of time. That’s the reason why an estimate of property’s value must be taken to see the economic and social trends. Governmental controls or regulations and environmental conditions must also be considered since they influence the four elements of value greatly, which are as follows:

Utility - this is the ability of investor to satisfy future owners' needs and desires;

Transferability - this defines the ease with which ownership rights are transferred from one individual to another.

Demand - this depicts the need or desire for ownership supported by  financial means.

Scarcity - this shows the finite supply of competing properties among investors.

When it comes to value vs. cost and price, value is not equal to cost or price, as cost refers to expenditure in actual terms, whereas price on other hand is the sum that is paid by someone for a specific thing. It is important to note that cost and price may affect value but they are not the determining value for any real estate property. For example: the selling price of a home may be $ 200,000, but its actual value can be relatively higher or lower, suppose if any one finds a serious flaw in it, the value will be considerably lowered no matter what the price.

Talking about the market value it is mainly an appraisal or estimate value of a property on a specific date. These reports are mainly seen and analyzed by the government agencies, businesses, individuals, mortgage lenders and investors when considering an important transactions in real estate.

The main aim of this is to determine the market value of a property with most probable price in competitive and open market. The actual price of property and market price, may not actually determine a property’s market value. For example: if because of threat of foreclosure a seller is under duress or if the property, without being exposed to  market was sold in private sale, then it is probable that it will be sold below the market value classified by professionals.

An accurate real estate valuation is important for investors, mortgage lenders, buyers, insurers and sellers.