Most people associate the term “property valuation” with the process of hiring a professional appraiser to estimate the value of a real estate property. While this is certainly one type of property valuation, it’s not the only one.
In fact, property valuation can be performed by anyone who is interested in estimating the value of a property, whether it’s for sale, for tax purposes, or for another purpose.
There are a number of different methods that can be used to value a property, and the method that’s used will depend on the purpose of the valuation and the type of property being valued.
Some of the most common methods of property valuation include:
-Comparative market analysis : This is the most common type of valuation performed by real estate agents when estimating the value of a property for sale. It involves comparing the sale price of similar properties in the same area.
-Income approach : This method of valuation is often used by investors to estimate the value of income-producing properties, such as rental properties. It involves estimating the property’s potential income and then discounting it back to present value.
-Cost approach : This method of valuation is often used by developers and builders to estimate the value of raw land or properties that are being developed. It involves estimating the cost of constructing the property and then adding a profit margin.
-Market value approach : This method of valuation is often used by lenders to estimate the value of a property for loan purposes. It involves looking at recent sales of similar properties in the same area.
-Appraisal : This is the most formal type of property valuation and is typically performed by a licensed appraiser. It involves estimating the value of a property based on a number of factors, including recent sales of similar properties, the property’s location, and the property’s physical condition.