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Various Types of Property Valuation Process and Methods

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    Types of Property Valuation Process and Methods

    The amount of money to pay for a particular real estate property is often the first thing that comes to the mind of people about real estate investment. Property valuation is simply the pricing of any real estate property. Another name for property valuation is real estate appraisal. You should know many property valuation methods and processes, but we will consider the significant three in this article.

    property approaches

    What is a Property Valuation?

    This is the process of determining the economic value of real estate investing. It defines a real estate property’s fair market value or the actual price a seller who is informed is willing to sell his real estate property to a buyer who is also reported. This means that both the buyer and seller have the essential information.
    It also means none was either forced to buy the real estate property or sell it. Nevertheless, you must know the value of a property is not the same as its price. An example is this: a distressed seller can wake up one morning to sell his property below the fair market price.

    The Benefits of Property Valuation

    The importance of property valuation can’t be overemphasized. It determines the amount of property insurance and property taxes to be paid. Also, a home appraisal is required by a mortgage lender before a loan is given or provided. This serves as protection for the potential buyer not to pay high for the real estate property. It also protects the bank from having to finance a real estate property worth below the amount invested in. A property valuation is needed during divorce legal matter settlement, lawsuit, and real estate settlement.

    The different types of property valuation process

    There are several reasons why people need a value placed on their property especially when they are thinking of selling the property. During this time they’ll be needing to apply the different types of valuation based on their purpose. Services from business valuation companies, surveyors, estate agents, mortgage lenders, insurance companies, etc. will be needed for the valuation purposes based on the roles they play in the buying and selling process.

    1. Online Valuation
      The online valuation is mainly used as a rough estimate and guide to get some more information when selling a property. It is a computer-based valuation of property that is calculated based on a person’s location, type of property, and current market price. The valuation can be done online in the comfort of your home, however, the disadvantage of this type of valuation is that it doesn’t give an accurate value as a property valuation.
    2. Mortgage Valuation
      If you’re applying for a mortgage when buying a property, your mortgage lender will request a valuation of the property or make their estimation of the value of the property before deciding on the amount to lend to you for a mortgage. They do so to be convinced that the value of the property will cover the amount they’ll be lending you for a mortgage. This type of valuation doesn’t require one to go into much detail. It’s a basic valuation which is usually a quick half-hour valuation process that is done on the property and covers obvious issues.
    3. Probate valuations
      After a person’s demise, the inheritance tax due would need to be calculated. So, you may need to have their property valued by getting a probate valuation on the deceased properties or assets. In the case where the disease has a firm with multiple business units, a multi-unit business valuation will be needed. It is recommended to engage professional valuators for this as they’ll know the appropriate valuation tools and the right valuation approaches to employ.
    4. Matrimonial Valuations
      In the case of divorce and separation process where assets jointly owned by a couple need to be rationed between them, the court uses a matrimonial valuation on the couple’s property to determine how the assets would be divided. The valuation reports are submitted directly to the court through a competent valuator chosen by the couple in question.
    5. Insurance Valuation
      The insurance valuation is used to establish the insurance value of a property. This is necessary as it will be useful in the event that your property (your home) gets demolished or a fire outbreak damages your home beyond repair and the cost for rebuilding is above the average market construction price. Another part of the insurance valuation that is involved in the process is the building reinstatement valuation.
    6. Tax Valuation
      If your property is subject to capital gains tax, that is, under legal terms you’re charged a particular percentage on the gains you made from the sales of stocks, real estate, or other investments, you will need a tax valuation to help you work out how much tax you owe. Tax valuation on capital gains tax can be very complicated, hence the need to employ the service of a professional tax valuation.

    The best benefits of a business valuation or a property valuation come when you work with the right valuation team. Whatever purpose you might be needing a property or business valuation for, always ensure you get in touch with the valueteam professionals.

    The Cost of Property Valuation and What it Takes to Be Done

    Only a certified professional appraiser is meant to perform a property valuation. However, an investor in real estate can do his property valuation. Price can go higher if the property is more prominent in size.

    Approaches for Property Valuation

    There are three major approaches to property valuation. They are:

    The Income Approach

    This is the standard property valuation method common in commercial rental properties and real estate. The idea is to have the current value of any real estate calculated by the net income it will generate, then divided by the capitalization rate.

    The Sales Comparison Approach

    This approach uses sales prices market data to evaluate a real estate property’s value. A property valuation is carried out in this method by comparing a property to other similar properties sold recently.


    The Cost Approach

    The cost approach property valuation considers a property’s value as the land’s cost-plus construction costs (replacing the property) minus the functional and physical depreciation. This real estate property valuation method is commonly used for not being sold quickly, like hospitals, government buildings, and schools

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