Carrying out a good real estate valuation is an essential step during any transaction of buying and selling a home. What is its use? How to have your house or apartment valued?
Why carry out a real estate valuation
Buy or sell a property at its true value
The real estate valuation is an important tool for determining the approximate value of a property. It benefits owners who wish to sell, as well as buyers interested in the property, individuals and lending organizations participating in the project or real estate investors looking for a good deal. Estimation allows you to make informed decisions about the planned operation.
After having valued their property, owners who wish to part with it can set a fair and realistic selling price, and therefore sell it more quickly. For buyers, the operation allows them to know if the price required for the purchase of the property is reasonable, and in line with market prices.
Estimate the property to set the amount of the real estate loan
On the side of banks and lenders, the property valuation is essential to evaluate the mortgage guarantee of the property, and to set the maximum amount of the property loan that they are prepared to grant to the buyer. Finally, real estate investors tend to use it to assess whether the planned investment is truly profitable, and to determine whether the asking price is justified by the potential rental income.
When to have an apartment or house valued
It is necessary to carry out a real estate valuation as soon as possible, from the moment you plan to sell or buy real estate. In the event of a sale, you will be able to finalize the transaction as quickly as possible. Saving time allowing you to invest the funds received in another project that is close to your heart, without selling off your house or apartment.
It is also interesting to have a property valued when you plan to carry out major work. You will thus be able to assess when you will recoup your investment after putting your home up for sale or rental. In other words, you will know if the increase in the sale price or the rent amount, which will be made possible by the work carried out, will at least cover their cost over an acceptable time horizon.
The same logic applies to real estate investors, who buy to rent, and who need a reliable real estate valuation at the time of purchase, to determine the long-term profitability of their investment, and arrive at the fixing of a rent that is both fairly high and consistent with the rental market.
How to calculate the valuation of a property
To make a good estimate of a property, there are different calculation methods that are suitable for each situation encountered and described above.
The comparative method
The method most commonly used by real estate professionals via dedicated sites is the comparative method, which consists of evaluating similar properties recently sold in the same geographical area, to arrive at the famous “market price”. . Comparable properties are chosen based on specific criteria such as:
- the size,
- the number of rooms,
- The geographic location,
- the date of construction,
- the equipment,
- energy performance, etc.
Estimate based on work
The second option aims to estimate the value of a property based on the costs of renovating the property. It is mainly used for people who intend to refurbish an old home, taking into account the costs taking place in the property. construction sector and material prices.
Estimate based on land income
The third method is rental income. Used by investors or owners interested in renting, it consists of estimating the value of a property based on the property income it can generate. It actually involves dividing the potential annual rental income by a rental yield rate or even by a discount rate to obtain the precise value of the property.
How to find out the price per m² of housing
To carry out your real estate valuation, you must first obtain key information, such as the price per square meter in an area. To do this, a real estate professional will be able to provide you with data on prices in the geographic area where the accommodation is located.
It is important to know that prices per square meter vary greatly depending on the geographical area, the condition of the accommodation, its date of construction, and the size and location of the neighborhood. It is therefore necessary to refer to recent data to have a precise idea of the prices in force today, and to take into account trends in the local real estate market.
Source: Online edition of Capital magazine from January 15, 2024
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