What is a particular piece of real estate worth? How do you arrive at a value? There are many ways to determine the value of real estate. First there are obviously many types of real estate. The most common types are residential, residential income, retail, commercial, and industrial. Secondly value can mean many things to different people. There are many definitions of value. There are fairly simple ways to evaluate value as well as complex advanced appraisal techniques. To really understand various types of value, a comprehensive study of concepts and terms is necessary.
For the average person who wants to know more about how homes are evaluated to arrive at a value or “fair market value”, there are some basic considerations.
Valuations should include the location of the property, date of the valuation, and purpose of evaluation. Information on the region, city and neighborhood should be gathered. Finally specific data on the subject property and specific data on comparable properties should be obtained.
“Fair market value” is broadly defined as “the most probable price a property would sell for between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts, with reasonable time for exposure in a free and open market.” “Fair market value” compares the property being sold in the open market with similar properties that have recently sold. For example, assume your home is of medium quality construction, 30 years old, three bedrooms, two bathrooms, a two car garage, approximately 1,800 square feet; the appraisal would include recent sales of very comparable homes in comparable neighborhoods that have been sold under similar market conditions.
The location or neighborhood quality and desirability are important. The transportation systems, school system, recreational facilities, parks, community centers, shopping centers, and religious centers are all taken into consideration when arriving at value. The compatibility between land use and the maintenance of homes, yards and landscaping are also strongly viewed.
When arriving at a “fair market value” for your home it is very important that you have an experienced, knowledgeable and successful Realtor who is an expert in your immediate area. This is critical if you expect to obtain top dollar for your home or income property.