How To Arrive At Your Home’s Right Value
If you are considering selling your property, you need to assess the value of your home as the very first step. There are numerous ways in which you can evaluate the real market price of the home. In this article, we elaborate on some of the methods you could use to reach the right conclusion.
Sales comparison approach
This is one of the most commonly used methods in India to assess property value. In this method, the value is assessed based on the price that similar properties got, when recently sold in the same sub-market.
Step 1: List the features and benefits of your property. These include total area, location, the age of the property, the number of bedrooms, overall condition, etc.
Step 2: Find out the sales price of at least three comparable properties. Ideally, they should share 70 per cent of the features that you have listed. Also note down any different characteristics. These comparable properties should not have been sold more than six-month ago. Make sure that you are looking at other properties within the same neighbourhood as the location is the key deciding factor in altering the property prices. You can also use online property portals for your research.
Step 3: Now run a quick calculation to attain a benchmark price for the property. If you have found three properties, you would have to take out an average of these figures or you can also find out the price per sqft, and then multiply it with the total area of your property to arrive at a benchmark price.
Step 4: Adjust the price keeping in mind the condition of the property or view for which the other properties might have got extra money.
This approach is used for properties that have been redeveloped where you are unable to find a comparable property. The cost approach is based on the assumption that a reasonable buyer would not pay more for an existing improved property than the price to buy a comparable lot and construct a comparable building.
Step 1: Under this method, you need to assess how much the property would cost to rebuild, either an exact replica of the current building or with comparable features with modern technology and construction materials.
Step 3: Arrive at a fair price after factoring in depreciation.
Under this method, the value of the land and the value of the building (construction cost) can be assessed separately and added to get a fair estimate of the property price.
For assessing land price: Land value can be calculated from the instances of sale of built-up properties in the locality, considering the shape, frontage on the main road, zone use and plot coverage and floor area ratio.
In cities where urban land tax is collected, the value of the land assessed by urban-local authorities can be taken as a guide to arrive at land value. The price fixed by development authorities or housing boards while offering the sites for sale can also be taken into account. For land parcels which are situated in the periphery of the city, the seller should also consider the development potential as the guidelines value.
For assessing building cost: The value of the building is arrived at by working out the reproduction cost and assessing the present value by factoring in depreciation.
Total cost = Value of building + value of Plot
Total cost = Total area x 10% of reproduction cost + value of plot