Property Valuation Definition, Importance, and Methods of Valuation

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Property Valuation Definition, Importance, and
Methods of Valuation
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What is a Property valuation?

• Property valuation helps to assess the actual
  value of the property.
• The value of the property can be used to
  determine the fair market value of the land,
  factory or building plot.
• Property value includes brand appraisal,
  copyright, intellectual property rights, goodwill
  and corporate success in marketing and
  advertising.

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The importance of Property valuation

• 1. Purchase/sale/transfer of property
• 2. Property insurance
• 3. Imposition of taxes
• 4. Property Repair
• 5. Property Issues

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1. Purchase/sale/transfer of property

• When buying, selling or transferring property,
  the last thing you want to do is not know the
  value of the property.
• If you do not know the value of your property,
  you may lose money by paying too much for it or
  selling it at a very low price.

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2. Property insurance

• Completing an assessment assigned by a third
  party for insurance purposes is not only a good
  way to be prepared in case of theft or damage to
  your property, but it can also help ease your
  claim if something goes wrong.

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3. Imposition of taxes

• Property valuation helps in the calculation of
  taxes such as property taxes, wealth taxes,
  income taxes, and so forth.

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4. Property Repair

• It is generally assumed that adding value and
  improvement to an property will increase its
  value.
• However, before making any such additions, make
  sure you are investing in the right improvements.
  
• As a result, a skilled property valuer will give
  you the true value of your property, which can be
  used to plan all the changes you want to make.

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5. Property Issues

• Property disputes are fairly common these days.
• It is important to have the property evaluated to
  distribute it fairly.

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What should the value of the property be?

• Accurate assessment requires complete data
  collection.
• Personal data related to specific propertys, as
  well as general statistics related to the
  country, region, city and location of the
  property, are collected and reviewed to reach the
  valuation.
• Use one of the following methods to determine the
  value of an property

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Cost approach

• The pricing technique assumes that a reasonable
  buyer will not pay more than the cost of
  purchasing comparable space for a rehabilitated
  home and building a comparable structure.
• To evaluate the value of the property, the cost
  approach considers the cost of the land and the
  cost of relocating the property, i.e. the
  construction fee minus the physical and
  functional depreciation.

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Approach to income capitalization

• The basic idea of ??an earnings approach is to
  calculate the current value of a real estate
  investment based on its net income.
• This is accomplished using the capitalization
  rate, which is the ratio of the current market
  value of net income.
• Income capitalization appraisals can be quite
  simple when the subject property is expected to
  generate future revenue and its expenses are
  predictable and consistent.
• The appraiser must first collect income and
  expense statements for the subject real estate
  property as well as similar properties in the
  same area to estimate net operating income.

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Approach to Sales Comparison

• The market data approach is another name for the
  Sales Comparison Approach.
• As the name implies, the sales comparison
  approach analyses market data of selling prices
  to determine the value of a real estate property.
  
• This method of property appraisal involves
  comparing a property to recently sold comparable
  properties.
• The sales comparison method is commonly used when
  valuing single-family homes and land.

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• Comparable properties frequently share some
  characteristics with the subject property.
• Among these is a close resemblance to the subject
  property, a sale in a traditional market
  environment, and a sale on a competitive, open
  market in the previous year.

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Conclusion

• The best technique is determined by the type and
  use of the property, as well as the availability
  of information.
• Mortgage lenders, investors, insurers, and real
  estate buyers and sellers all rely on accurate
  property valuation.