Commercial Real Estate Valuation And The Factors Contributing To It

Commercial Real Estate Valuation And The Factors Contributing To It

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Purchasing a real estate is a complicated procedure. There are various factors, which you should take into account before purchasing a real estate, one such factor is evaluation of the property. There are various ways in which you can determine the exact value of a real estate property.

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Factors contributing to valuation

  • Location – The location of the real estate is a major factor, which contributes to land valuation.
  • Appraiser – None of the properties are similar that is why they require appraisals. Appraisers are property valuers, they take many factors into consideration and put forward the market value. The value presented by them often becomes the selling price of the real estate. In some countries, there is a rule that the appraisers must be certified.
  • Condition – The physical conditions are also taken into consideration. Functional and economic obsolescence are two key factors, which contribute to valuation. Functional obsolescence refers to the faults in the design or structure of the building and economic obsolescence refers to any problems in the surrounding areas. These are known as depreciations.

Different types of values

  • Market value – It is the value suggested by appraisers. It is almost equal to the selling price.
  • Liquidation value – It is much less than the value at which the property is bought, it is the value of the land when it is sold during an exposure time.
  • Insurance value – It is the value of the property covered by insurance policy.
  • Investor value – It is the value to one particular investor and maybe more or less than the market value. It differs from investor to investor.

Approaches to valuation

There are three different types of approaches which should be valued,

  • Sales comparison approach

In this method the land is compared to another similar property whose value is already known, after this the estimated value is decided. Since, two properties cannot be similar the factors contributing to valuation are also taken into consideration in this approach. The other property with which the comparison is made is known as comparable.

  • Cost approach

It is when a new building or buildings are added to a property so that the value of the property increases. Depreciations are also taken into account in this form of approach.

  • Investment capitalization approach

It is used to value industrial or commercial properties. This approach is the best form of approach for income producing properties.

Automated valuation model is another form of valuation, which takes regression analysis and geographical position of the real estate into consideration. This method is abbreviated as AVM’s. AVM is a real method of valuation but cannot be used in rural areas. It can only be used in cities.

Conveyancing 24-7 provides the exact value one needs to pay for a real estate property. They include the stamp duties and the disbursements in the values they draw up. They have a group of solicitors, who provide quotations at appropriate prices, for further information visit http://www.conveyancing24-7.com/conveyancing-quotes-london/.

Commercial real estate is a good form of investment. Plunge in only after you know the proper value and not before that.

Author’s Bio:

Stephen Tomalin has written this article. As an experienced conveyancer in London, he helps his clients in all types of legal paperwork involved in real estate transactions. You could request for fees quotes by visiting www.conveyancing24-7.com.

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