What is a property valuation?
Real estate valuation refers to the process of calculating the market or market value of a property that can be an apartment, a plot, a parcel, a house, a shop, etc., at a given time and for a specific purpose using a predetermined methodology. In valuations there are two very important parameters that affect the market value of the property, these are:
- The economic situation and the general situation of the real estate market in the region
- The particular features of the property under valuation (surface, ownership status, legality, location, location, orientation, condition, maintenance-damage, age, etc.)
The appraisal approach concerns the way in which the appraiser decides to determine the value of the appraised property. The estimation method refers to the specific process, which is based on some or some valuation approaches, applied by the valuator. Important is the fact that the methodology is expected to evolve as a result of many effects such as upgrading the available computing tools.
Valuation Approaches
One or more valuations approaches are required to make a valuation. Appraisal methodology is based on the free market economy and therefore requires an understanding of the mechanism of supply and demand. The basic approaches to land and building assessment are:
- Comparable approach, concerns valuations where the market value arises from the comparison of the property under valuation with information and other properties derived from market transactions and meet criteria related to the relevant value base.
- Income approach: refers to the valuation methods that calculate the capital value through the capitalization or discount of the estimated future income that will come from the property under valuation, whether it is rent or income derived from the activity arising from the business which operates at the property.
- Cost approach: The cost approach, which includes, among other things, the Depreciation Cost method, is used to extract an indicative value of a property, based on the idea that a buyer is not willing to pay more money to acquire a property. from the cost of acquiring a property of equal utility. This cost includes the cost of the appropriate land so that construction is possible. Many times, and especially in the case of the application of the Depreciation Cost method, it is necessary to take into account any impairment of the estimated property, in relation to the corresponding new one, in order to export the Depreciated Cost of Replacement.