Market value assessment: methods, reporting procedure, objectives

Evaluation of an apartment or house may be needed in many cases. Yes, and it’s very important for yourself to know what income you can get from selling real estate. After all, this is an asset that must be used wisely, and therefore, to know everything about it. You can read more about assessing the market value of an apartment in this article.

What is the market value?

Now the whole world is dominated by the market model of the economy, which involves the purchase and sale of various goods for the money for which people are willing to purchase them. For example, if you produce cheap disposable plates, then their price is unlikely to be very high. Otherwise, you simply will not have buyers. The same principle can be applied to real estate: to apartments and houses. But in this case, it is much more difficult to set an objective price that would not reduce the investments of the owners and at the same time not be sky-high. The situation is often complicated by the fact that during the sale of property, owners are rarely objective. If good memories are connected with the house, or your childhood passed in it, then it can be difficult to correctly set the price based on market conditions.

That is why the services of appraisers, which help soberly assign the right value, are so popular. Assessing the market value of an apartment may be associated with some difficulties if the apartment owners have an urgent need to quickly sell the property or it is located in an unfavorable area.

By type distinguish between current, past and future market value. As you might guess, it depends on the time for which it is calculated. Most often, a current assessment is carried out, but if you intend to invest in an apartment as an investment, then the cost of housing in the future may come in handy.

Do I need to know the price?

Why find out the value of the property? The objectives of assessing the market value of property may be different. But most often an object is evaluated in the following cases:

• If real estate want to mortgage or lease. In the first case, the cost is needed to calculate the amount of funds provided (for example, for a mortgage or a loan).
• If the property was presented, and you need to fix its real value.
• In bankruptcy.
• To challenge the cadastral value. When selling property, the state charges a tax to the treasury, which is imposed on the difference between market and cadastral value. To challenge its magnitude, the help of an appraiser may often be needed.
• When selling or buying.
• In any other situations when you need to know the real price of the object.

Assessment Methods

There are three methods for assessing market value.

The most popular is considered costly. It takes into account how much of your own funds you have invested in the purchase and arrangement of your home. The criteria for this method are quite clearly defined. To make calculations, you need to know how much it will cost to build the exact same house or apartment in the current moment. This takes into account absolutely all the little things: from the cost of doors to the price of installation services. Of course, the wear and tear of the home is also calculated, as a result of which you can quickly get the exact price of the property. Another definition that you need to know with the costly approach is replacement cost. How much will it cost an apartment with the same area and about the same place, but built with other materials? As a result, the owner can get a clear picture of how much his property actually costs. After all, the buyer is unlikely to pay for an object that does not meet the stated requirements.

Another method is comparative. It consists in conducting research on similar transactions. For example, last month they bought a 1-room apartment from Vasily in about the same area with the same social amenities. How much did he get for her? Having collected certain statistics from several such cases, we can draw conclusions about the average price of property in this segment. At the moment, for a comparative assessment, you do not even need to resort to the help of specialists: many sites collect information and display the result.

The profitable property valuation method takes into account how much you can get after buying a property. This method is used, for example, when buying an apartment in order to rent it out later. Indeed, in this case, completely different factors are important: the proximity of the metro, design, area, etc. The profitable method makes it possible to assume with a high degree of probability how profitable or unprofitable the investment will be in the future.

Criteria

In each approach, different criteria are used to assess the market value of the premises. But in general, they are all based on the following factors:

• Transport accessibility (metro, stops, large roads).
• Living space.
• Layout.
• Accessibility of various social facilities: shopping centers, schools, kindergartens.
• Air quality.
• The presence of a number of parks and other natural sites.
• Floor.
• The material from which the housing is built.
• Finishing and repair.

Appraisal of the apartment

The most common object to evaluate is usually the apartment. The customer just needs to answer the question of why he needed an assessment. Based on the response, the contractor selects the appropriate method. But most often, the market value of an apartment is assessed taking into account all three approaches. If all of them are applied, then the market value is considered reasonable. Each approach also has a coefficient that reflects its reliability. For example, in the comparative method, the confidence coefficient is quite low, since many transactions on the Russian market are opaque, and objects often do not have sufficient analogues. How is the object evaluation procedure?

1. The appraiser selects the valuation method that is most suitable for a particular apartment or house.
2. The customer can choose the deadlines for the implementation of his order. He should also state the purpose of the study and the amount of remuneration.
3. If both parties have come to an agreement, an agreement is drawn up between them. Often, the services of an appraiser are not cheap, so the contract is an additional guarantee of fulfillment of obligations.
4. The more methods will be used in the study, the more expensive it will be. Therefore, the appraiser can voice the price of each separately to understand what amount is involved.
5. Next, the performer conducts the assessment itself, calculates the reliability factors and provides the final value.
6. The report on the current market value of the object is completed last.

Home Appraisal

Assessing the market value of a house is not much different from a similar procedure for an apartment. To begin with, the appraiser determines the cost of the plot, not the cottage itself. To this amount, the specialist adds the cost of work and materials that are needed to build the same house. Most often, the assessment of the market value of the site is carried out by an expensive method. If the customer has chosen a comparison method, then the contractor will look for similar objects in neighboring areas in order to calculate the average cost of a plot with a house. The result is a weighted average price that you can rely on at the time of sale.

Buying or selling real estate is a very important stage. If the value is incorrectly estimated, the owner may strongly regret that he did not use the services of a professional appraiser. After all, as a result, you can lose a much larger amount.

The procedure for the preparation of a document of value

The report is the result of real estate appraisal, which includes all the necessary information. It contains the methods that were used to evaluate, analysis of characteristics, a description of the market situation and much more. Simply put, the report serves as an official confirmation of the designated market value and can be used in transactions or for obtaining loans. In order for the report to be valid, it must contain the following sections:

• Title page (number, information about the contractor and owner of the property).
• Table of contents. Despite the fact that the report is not very long, the table of contents allows you to quickly understand the existing sections.
• A cover letter, which contains all the basic information contained in a free format. It usually refers to the approaches taken.
• The findings indicate the results of the assessment.

Thanks to the convenient format of the market value assessment report, each person can easily find the information he needs, and you can find out the result of the procedure simply by looking at the last sheet.

The difference between market and cadastral value

During the sale or purchase of real estate, you probably have to come across a concept such as cadastral value. This is the price of housing, which is set by the state through its own assessment. The cadastral value is not always true, therefore, a gap of several hundred thousand rubles may arise between it and the market price. What steps should be taken in this case?

• Order a property assessment by a third-party specialist.
• If the difference turned out to be really significant, then it is necessary to submit an application to Rosreestr with a request to review the value of the cadastral value based on the available documents. In this case, a competent report can play a big role.
• In case of refusal, you can challenge the decision in court. The main thing is to have time to do this within 6 months from the date of the assessment.

Expert Advice

Assessing the market value of a residential building is a very complicated procedure, which has many nuances:

• If the cadastral value is lower than the market value, this can significantly reduce taxes. But if you are going to sell real estate, then it would be better to review it.
• Use free consultations. Some companies provide them for free for advertising purposes. Also on the Internet you can get expert advice on controversial issues.
• Evaluate well in advance. The process may take a long time. Evaluation alone is not done quickly, and unforeseen difficulties can arise along the way.
• Choose companies located in the same area as the property. In this case, you do not have to pay additional transport costs and time of specialists.
  

Who to contact?

If you decide to resort to the services of an appraiser, then you will need a specialist who deals specifically with your real estate segment. In big cities there are usually a lot of options. Choosing the right company is based on reviews or recommendations of friends. If none of your surroundings can share the contacts of a trusted person, then when choosing an artist should be guided by the following criteria:

• The company must operate in the market for several years and have a good reputation.
• The site must be presented with licenses and certificates that will confirm the right to work of the company.
• Positive feedback on the Internet can also serve as a factor for cooperation.

Appraiser Cost

Many people think that the services of an appraiser are worth crazy money, because he has to go to the site and do a lot of work. But in fact, for the evaluation of the apartment you will need to pay from 3,500 to 5,000 rubles. The cost depends on the company, the size of the apartment and its remoteness from the city. Usually trips to the region are paid separately. Also, the price premium goes to urgent orders, usually the cost rises by 20%.

Summary

If you figured out what market valuation is and what methods exist, then you have become more competent in matters of buying and selling real estate. After assessing the object and generating a report, you will know exactly how much your apartment, house or land is worth.