Are you interested in seeing how much your home is worth, but unsure of how to go about doing that? Do you want to find a way to list a fair price for your home while ensuring a significant return?
If so, then you need to learn about the different home valuation methods. Every side of the real estate process has a personal agenda; the valuations help eliminate that from their equation.
There are essentially three methods you’ll want to know about. Here are explanations of the different real estate valuation methods as well as their benefits. Consider these as you try to put a price tag on your home.
Market Value Method
Often, homeowners are using this valuation technique without knowing what the name of it is.
The market value approach means that you place the price of your house by comparing the worth of similar houses that have sold locally.
In other words, if you saw that a two-story home with a two-door garage (like yours) sold for around $325,000, then you’d price it around the same.
Here are a few different factors to consider when selecting this real estate valuation method.
1. It Can Be Hard to Factor Amenities
For example, that house that sold for $325,000 might not have a pool like yours or have a kitchen that was recently remodeled.
The amenities in your house will help the price skyrocket in any valuation method. But in this method, they’re hard to factor in without proper real estate advice.
Try to list out all of the amenities that you have in your house, then add up what you believe them to be worth.
2. Let the Professionals Handle It
Many professional services in the real estate business use this valuation method such as mortgage lenders, real estate agents, etc.
Attempting to use this method without any prior real estate experience can end up with you selling for less than what you could’ve received.
If you’re wondering “how much is my house worth?” then follow this link to receive an instant property value.
Placing your real estate pricing in the hands of professionals is always the smartest move to make. It helps you reassure the decision to give your home the proper selling price.
Income Valuation Method
Many real estate purchases, residential or corporate, are made with the idea of generating a future profit from the investment.
It’s those types of investments that have made the income valuation method such a common technique in recent years.
This valuation method essentially prices the property based on the income that it can produce for the investor down the line.
For example, if an agent was selling a business building, they’d base its selling price off of the rent that the purchasing would inherit as income down the line.
Here are several things to consider about this method and how it might be advantageous for you to use.
1. It’s a Projection, Not a Comparison
Unlike the previously-mentioned market value method, the income valuation is not comparing the property to others. It’s merely basing it’s asking price off of the potential income to be had from it.
Many experts use the average rental price of past owners to unlock how much they should sell the property for.
Because of its projection-based costs, you shouldn’t be surprised to find it much higher than other local properties that are similar to it.
Remember, because it isn’t a comparison those local properties mean almost nothing to the equation.
2. It’s Not Just for Corporate Buildings
You may have almost shrugged this valuation method off because it sounds like more of a corporate-based evaluation.
However, given today’s market, the income valuation method can also be used for residential homes in your neighborhood.
Many people purchase the home with the intent of renting it out to produce a nice, consistent profit for themselves. If the seller feels that their home could potentially be used for that, then they might choose to use the income valuation process.
Cost Valuation Method
Perhaps you have a property on your hands that isn’t going to be sold very easily such as a school or previous healthcare building.
These types of buildings are generally sold with the cost valuation method, which considers the price of the land in balance with the cost of construction. Construction is considered if the understanding is the investor will most likely tear the building down.
Here are a few considerations about the cost valuation method for those of you that are unfamiliar.
1. It Focuses on the Land, Not the Building
The cost valuation method helps sellers land a fair price for the real estate property that they’re selling.
Rather than selling a building that’s likely outdated (hence why it’s not in use), it allows the seller to price the property for the valuable land it’s on.
Maybe that land is in a prime-time spot that investors are interested in. Perhaps the size of the land is intriguing to many investors.
2. It Uses Comparison to Its Advantage
This valuation method allows the seller to base a price off of similar lots and what they’ve been sold for.
Using comparisons for this valuation method will help both the seller and the investor feel confident in the price range.
Replacement cost is generally factored in by determining the cost of replacing one square foot of the property, then multiply that cost by the amount of square footage that the property has.
Consider These Real Estate Valuation Methods
Now that you’ve seen several real estate valuation methods to consider, it’s time to find the right one for your property.
If you’re still unsure as to which one you should use, seek out the help of a professional.
Be sure to browse our website for more articles on property selling, as well as several other topics.
