The Methods of Real Estate Valuation
Knowing the current market value of your property is crucial, not only when selling but also when buying, securing a loan, considering tax implications, and more. The method used to evaluate a property is determined by our real estate experts based on various factors, with the goal of reflecting the property’s true market value as accurately as possible.
The most common methods for determining property values include the Comparative Value Method, the Cost Approach, and the Income Approach.
The Comparative Value Method in Detail
Our agents use an extensive database of actual sale prices recently achieved on the regular market as the foundation for the Comparative Value Method. We analyze properties that are similar to the one being compared, for example, in location, size, and features. Similarities and differences are balanced through adjustments, resulting in a realistically achievable sale price for the property.
The Comparative Value Method is typically applied to apartments, single-family homes, and duplexes that are privately owned and occupied. This method requires sufficient comparable values for the property being evaluated. If these are not available, the market value can alternatively or additionally be determined using the Cost Approach.
The Cost Approach in Detail
This method is usually applied when evaluating single-family homes, duplexes, and specialized buildings for which comparable properties are difficult to find. The basis for this calculation is always the construction costs of the building, taking into account current building prices and construction cost indices. Our real estate experts first determine the land value based on the standard land value set by local appraisal committees.
To then calculate the building’s value, our agents estimate the construction costs based on current building prices, which are summarized in construction cost tables. Another calculation factor is the remaining useful life, which is used to account for depreciation due to wear and age of the property.
It is important that this method of property valuation also considers individual characteristics and the current conditions of the real estate market.
The Income Approach in Detail
The Income Approach is applied to income-generating properties, such as rental properties, multi-family homes, commercial properties, or mixed-use buildings. The expected return from the property is the primary focus. Key factors in the calculation include the land value, annual net rental income considering maintenance costs and rental losses, and the expected useful life. The goal of the Income Approach is to balance the expected return against the anticipated risk.
For this complex method of property valuation, not only is careful and expert application essential, but also the use of current market data and its correct analysis.
Expert Valuation of Your Property
Whether you are a private owner, entrepreneur, or investor looking to buy, rent, sell, or mortgage a property, do not forgo a professional property valuation. Without it, you always risk losing money—whether by paying too much for a property or setting a sale price or rental rate too low.
Our real estate experts at BAMBERGER IMMOBILIEN are here to assist you if you would like to determine the current market value of a property.