09 January 2020

What Data Points Property Valuers Use to Prepare Appraisals

Photo by Breno Assis on Unsplash
When it comes to appraisal of the property, the opinion of property valuers can be crucial, especially with the uncertainty and asymmetries of the property market. If you are looking to venture into real estate or just buying a property (either land or house), then you would need the expertise of a licensed valuer. The worst mistake you can do when looking for a property is assuming you know everything and can be able to handle everything thrown your way.

Property valuers are your go-to people, whether it is your first time or you are a more experienced real estate agent. There are specific data points that property valuers use to prepare their appraisals. The property appraisers will be able to gather, analyze, interpret, and assess the various kinds of essential data that will work towards estimating the value of a particular property. One of the best property valuers agencies is Brisbane Property Valuers of  www.valsqld.com.au given in the details you will find more information.

Considering the uncertainty nature of the property markets, in order for the value approximation to be possible, the property valuers use certain data points. These data points include:

  •  market value
  •  investment value
  •  insurable value
  •  liquidation value
  •  value in use

a) Market value
This data is usually determined by an estimate of the amount by which a buyer and seller are willing to agree upon. The market value is aimed at achieving a fair sale that would be acceptable on the open market. With market value, whether you are the buyer or the seller, you both act with informed decisions and decide on the final price that you are comfortable with without being coerced or compelled.

How it is assessed

The market value can be evaluated using three different approaches; income approach cost approach and sales comparison approach.

Under the sales comparison approach, the value of the property in question is based on what other similar properties had sold for in the same market. It is through comparing similar properties using comparable features such as location, age, square footage, number of rooms, lot size, etc. that you will be able to find a benchmark price.

The income approach, on the other hand, is for leased buildings. This uses the rental income of the building to determine market value. Examples are apartment buildings, duplexes, etc.

Finally cost approach calculates the amount it would take for the rebuilding of the property with exact features using modern construction materials. After that, the property valuer subtracts the total amount accumulated depreciation of the property value due to wear and tear.

b) Investment value

Investment values are in the case of an investor who is willing to pay a given amount of money regardless of the market value of the property. As an investor, you may have your investment value metric that you want to use to invest in a particular property (This could end up being higher or lower than the market value).

This will allow you to compare the price of investment and the rate of return you may look forward to getting.  The value of the property ends up being unique to your objectives.

c) Insurable value

Any property you may look into needs to be insured with standard insurance policies for any indemnity cover. Your property valuer will check whether the insurable value is lower than the market value of the property.

The insurance can cover a wide range of things from the cost of building improvements, replacement costs, or even site improvements. You should be cautious with your insurance cover as some companies have different policies.

d) Liquidation value

This may include the total worth of the physical assets in case of a business failing and going bankrupt. The selling of assets becomes necessary. In the case of a company, this will include fixtures, real estate, equipment, and inventory.
You should note that liquidation value does not in any way include intangible assets, which include brand recognition or intellectual property. You can get assets at a lower price since they are usually sold at a loss due to the urgency of the seller.

e) Value in use

The value in use applies to current cash flows and other benefits that are generated by a specific asset belonging to an owner. Sometimes the value of the asset in use may be higher than the market value of the property you want to acquire.

Whether you are an investor, looking to get into real estate, or you want to buy land/building for other uses, you will need the help of a property valuer. The property valuers will be able to use data points to be able to come up with the best estimate of what your property or the property you want to buy will cost.

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