How To Determine The Market Value Of A Property

Table of contents:

How To Determine The Market Value Of A Property
How To Determine The Market Value Of A Property

Video: How To Determine The Market Value Of A Property

Video: How To Determine The Market Value Of A Property
Video: How to Value a Property [Market Value of a Property] 2024, March
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The market value of real estate is determined in accordance with Federal Law No. 135 of July 29, 1998 "On appraisal activities in the Russian Federation". In this case, several methods are usually used independent of each other.

How to determine the market value of a property
How to determine the market value of a property

Instructions

Step 1

Enter into an agreement with a client who wants to know the market value of the property. The assignment for assessment is drawn up according to FSO No. 1 and includes:

- the object of assessment;

- information about the ownership of the object of assessment;

- the purpose of the assessment;

- intended further use of the assessment results and possible limitations;

- type of cost;

- date and timing of the assessment;

- the limitations and assumptions on which the estimate should be based.

Step 2

Collect and analyze all the information necessary to objectively assess the value of real estate:

- general economic data at the level of the region, city, district, depending on the property in question. Market value can be influenced by political, economic, social and environmental factors;

- data directly related to the property (location, depreciation costs, information on income and expenses, history of ownership, etc.);

- data on supply and demand in the real estate market.

Step 3

Choose which of the three possible methods for determining the market value of a property will be most accurate in this situation: comparative, profitable or costly.

Step 4

Use a comparative approach, which consists in calculations based on the study of market prices of other properties that have similar characteristics to the one being assessed. However, do not forget that the objectivity of such an assessment largely depends on the completeness of the data obtained from market research.

Step 5

Use the income valuation method if its purpose is to determine whether the expectation of future benefits (income) from the property is justified. To do this, you should also have the latest data on the real estate market and, in addition, take into account all possible factors that may affect the level of income from owning a property.

Step 6

Determine the market value of a property using a cost approach. This method is mainly used in the appraisal of land plots, although it can also be applied to residential and non-residential real estate (for example, to calculate the cost of redeveloping a building for a hotel or shop). This approach calculates the upper limit of the value of real estate in a new quality.

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