When a person looks to buy a real estate property one of the first things he/she must do is making a property value estimation.
Before investing in or buying a property, understanding the true value of a property is vital. Going blindly by the value of property quoted to you is a mistake people occasionally make.
Calculating the valuation of a property, especially in the residential sector involves various factors. Some of the key factors here are:
Size of Property
Quality of Construction
Floor Plan Layout
Number of Rooms
Quality of fixtures and fittings
Overall Land Size
Condition of Property
Many a time, the above-mentioned factors go unnoticed by a new homebuyer, unless they understand a few basic things.
Firstly, What is Property?
Any asset that a person or a business entity has legal rights & title over are called properties. Tangible or intangible, possessing the legal titles of a property enables the owner to control everything pertaining to the property.
Real Estate is tangible property.
Second. What is Real Estate?
Simply speaking, Real Estate is any real property above & below the land.
What does this mean?
The rights to land (developed or undeveloped/cultivated or uncultivated), rights to buildings, rights to the air above & the land below are all encompassed in Real Estate. Anybody who owns any of the above is said to own Real Estate.
Third. What is Valuation?
Valuation is the analytical process of determining the current (or projected) net worth of an asset.
Next. What is Property Valuation?
In Real Estate, property valuation is the process of determining the fair price of the property for buyers to understand the true worth and potential of a property.
But in Real Estate, Valuation & Value work differently.
To ascertain the credibility of a property in terms of investment we need to do an accurate & practical property value estimation to understand the actual value of the property.
It is important to ensure you’re not overpaying for the property based on a partial valuation.
Another fact is that Real Estate is very different from other properties. In Real Estate, properties realize appreciation on value over a long period of time.
When properties have the tendency to appreciate over many years, it is inevitable to consider socio-economic factors & trends. The local government’s regulations and environmental conditions are key aspects as well.
Hence, the value of a property can be considered as the current worth of the appreciation that the property can realize in the future.
Now when it comes to 4 important parameters that should be considered before even thinking of buying a property, they are:
Demand: The need for ownership & the financial ability to purchase it.
Utility: The worth in terms of satisfying the owner’s needs
Scarcity: Limited competition in neighbourhood properties
Transferability: The ability to transfer rights of ownership with ease
After duly examining these parameters the home buyer can move on to doing the property value estimation.
Now let’s cut to the chase and understand the 9 methods for value estimation of a new property.
Whether the Central Business District or the suburbs of the city, the choice of location is critical to gauging the property value. Determining the standards of living in the locality & assessing the potential for infrastructural development in that community are key aspects as well.
The best way to understand everything about a locality is enquiring about recently sold properties in that area. It helps us ascertain the current property trends and analyse whether you’re getting a good deal on the property you’re interested in.
Another indispensable detail is Urban Development. The urban development in an area is integral to its growth potential.
Things that help us understand the scale of urban development in that locality:
Well-Connected Road Network
Regular Maintenance & Upkeep of Roads
Development of Public Facilities in the locale
Presence of Schools, Colleges, Hospitals, Markets, Shopping Malls & Retail Outlets, and Entertainment Hotspots
Accessibility to Public & Private Transport
Connectivity to other areas & other parts of the city
The second way would be the size of the property. The size of the property defines the worth, resale potential & scalability of the property. Estimating the value of the property is done based on the ratio of the size of the land used to land developed and the ratio of the size of the property to the Carpet Area of it.
HomeBuyer’s tip: Don’t Compromise on the Size of Your New Home. Later, You Don’t Wanna Regret that Your Family & You are not able to Live Comfortably because your Home is Cramped Up.
By Examining the Super Built Up Area, Built Up Area & Carpet Area you can do a precise property value estimation. Also, analysing the extent of the utility of your Super Built Up Area is imperative to value. If there’s a portion of land that isn’t useful to the residents, it is a waste of space & money.
Therefore, ensure you contemplate on the manner in which space has been utilized. Efficiency is crucial to utility & profitability.
HomeBuyer’s Tip: Initially, Bigger homes might be expensive but on a Long Term basis they are Better in terms of Utility, Investment Potential and an Elusive Upgrade in the Future.
In the era of construction that we are in today, various techniques & technologies are practised. Based on the need & demand of the project, real estate developers adopt different methods of construction that are suitable for their project.
Knowing the specifics of the technology & quality of the materials used is vital to understand the Overall Quality of Construction.
While estimating the property value, Quality helps us ascertain the value, lifetime & future potential of this project from an investment standpoint.
From a residential standpoint, Quality is critical to the daily lifestyle & wellbeing of the residents of the house. Hence, examining & then comparing them to the existing standards of quality in the market makes the property valuation more realistic.
A great man once said, “The First Impression is the Best Impression”. The Floor Plan Layout of a property is the first impression of a property. It is the map or a blueprint of the property.
The Floor Plan Layout is a detailed diagram that contains a descriptive layout of the property with all dimensions & minute details. A Precise & Graphic Floor Plan Layout is the key to a well-built house.
Analysing the floor plan gives us an outlook on the final look of the property. This is integral to the estimation of property value as it provides accurate details that can be considered as metrics to calculate the value based on the average cost of land in that locality
This is an aspect that most home buyers and owners know of. Comparing the number of rooms offered with the land area used is pivotal to the property valuation.
For example, a 3BHK (Bedroom-Hall-Kitchen) property that has 2100 square feet carpet area is a spacious property. It has high prospects in terms of comfort of living, appreciation, and higher demand during a resale.
The number of rooms is fundamental to the property value. It defines its true value & utility.
By comparing the number of rooms in ratio to the land area, especially carpet can help a home buyer easily estimate the property value.
The Fixtures & Fittings inside a home that are fit apt to its decors portray the quality of the interiors. In the era of brands & luxury, that manufactures high-quality fixtures & fittings.
From a daily life standpoint, fixtures & fittings can be the most utilized resource in a home. They are used regularly & can experience the most wear & tear. The extent to which they can be used is predefined by their quality. Thanks to branding, buyers can easily verify the quality & value of them.
Hence, it is easy to determine the quality of fixtures & fittings used in the property. Not only this, it is easy to verify their value which can be done by just cross-checking with the market prices & trends.
The Overall Land Size of the Property is the Super Built Up Area of the Property. It includes the actual house, the common area, parking, elevator, lobby or any other feature of the property like a lawn or a play area.
The Overall Land Size is crucial to perceive the estimate of the property value as it helps us understand the Value-Added benefits that entail the amenities in the Super Built-up Area. Amenities add a lot of value to any property and are significant in the True Value of the Property.
Hence, taking into account the overall land size, amenities provided can lead a person to a clear estimation of the property value.
The condition of the property you’re seeing is another way you can estimate property value. In Real Estate, it’s common that properties remain unsold for some time. In such cases, there’s a chance for the property to experience a change in condition due to various reasons.
While carrying out a property valuation carefully looking into the condition of the property help a homebuyer to comprehend on whether the property’s value has come down due to lack of upkeep or a major delay in the sale. Sometimes, there’s a possibility that there might be a hidden defect that is the reason behind other buyers not buying the property.
Hence, consulting experts and engineers to do a detailed property check can bring out some interesting facts about it. Could be a faulty foundation, improper slab work, rough finish of paint or tiling and basically any factor that affects the look, touch&feel, & quality of the property. All these can bring down the value of a property drastically.
Sometimes, the look on the outside can reveal the inside. The Overall Presentation of a property can act as a catalyst to increase or decrease in property value. Right from the approach path, exterior look, and cleanliness to the look and condition of the interiors, it matters a lot.
When doing a property valuation, things like the peeling of paint, rust to metal fixtures and condition of the interiors & exteriors can be scoped to establish the credibility of the property.
Therefore, by carefully examining the overall look & feel of the property you can do a property valuation & be assured that you’re getting your money’s worth. If the overall presentation ain’t great it automatically leads to depreciation in value.
Homes247.in Expert’s View:
Our digital initiative, the ‘Home Guide’ section of our website has been articulately designed to educate & inform homebuyers on all the developments & trends in the Real Estate sector.
Currently the leading Real Estate Portal in Bangalore, we study the market extensively and publish articles & blogs that are relevant and needed.
When Homebuyers are looking for a new property to buy they must understand the valuation of the property & be able to find the true value of a property.
Home Buyers who enjoy the support of Homes247.in need not take the special effort of doing all this research. We make it easy for you by doing it already.
Hence, we suggest homebuyers to keep themselves up to date with all developments and consult our property experts. Our experts do a completely unbiased Property Value Estimation which will help buyers realize the true value of the property.