The accurate real estate appraisal - Which procedures and important points should you follow?

When you first think about selling your property, the most important thing obviously is to accurately value the property. The accurate real estate appraisal can significantly shorten the time spent for your property sale. An inaccurate appraisal will delay the further home selling process. The sale of real estate often fails due to an incorrect assessment of the market value. We often ask ourselves the same questions, for example, how much is my property really worth? Which factors influence the value? And what does a real estate agent actually do for me when I commission them? What procedures do professionals use for real estate appraisal? Which measures can even possibly increase the value? You will find answers to all these questions below.

Directly to the desired topic

1. Main reasons for property valuation
2. How can the value of a property be determined correctly?
3. Important factors that can influence the value of property
4. Why is property valuation necessary?
5. Five steps of our valuation of your property

1. Main reasons for property valuation

1) Buying and selling: In principle, buyer and seller could agree on a price acceptable to both parties. However, a qualified valuation expert has an objective authority in order to conduct a fair basis for negotiation.

2) Taking out a loan or mortgage: When a loan is taken out, the lender (e.g. bank) checks whether the debtor will be able to repay the loan. Valuing a property serves as the basis for determining the credit limit that the borrower will ultimately be able to dispose of.

3) Divorce or separation: In this case it will not be possible to avoid a property valuation. This is the only way to reliably and fairly assess divisions of property, agreements, arbitration proceedings, etc. A professional expert guarantees a reasonable processing of claims of both parties as well as the clarity after a separation.

4) Taking out property insurance: It is important to determine the value of the property when taking out insurance, as this serves as a basis for the insurer to determine the premium to be paid. In case of damage, the property valuation also provides the basis for the scope of the insurance coverage (e.g. in case of natural disasters, accidents, etc.).

5) General overview of assets: In order to always have the right overview of the availability of one's own assets, property valuation is an indispensable component. An expert´s opinion on all value-relevant factors provides clarity here. For example, knowing the exact value of the property is a great relief if the owner is forced to make a quick decision to sell its property.

2. How can the value of a property be determined correctly?

1. MATERIAL VALUE METHOD

Definition: The material value method is used to calculate the market value of a property. It is considered one of the most complicated procedures and should therefore only be used by experts, as even small deviations in the estimation of the market value can mean a large difference in the value of the property.

Total asset value formula: (land value + building asset value) x market adjustment factor

Application:

1. Suitable for single-family houses when the current market price is not available (e.g. in areas with missing comparison objects).
2. When the comparative value method and the capitalized earnings value method are not suitable.
3. Properties that are listed as historical monuments.

2. CAPITALIZED EARNINGS VALUE METHOD

Definition: In the capitalized earnings method, as the name suggests, the fair value of a property is derived from the rental income. However, the central question here also is how much profit a buyer can make with the property. The decisive basis is the future returns.

Application: The capitalized earnings value method is primarily used for rented residential properties as well as for commercial properties, as it is based on future returns. The capitalized earnings value method also provides the ideal basis for calculating the value of the surplus of income and costs in the case of mixed residential and commercial properties.

3. COMPARATIVE VALUE METHOD

Definition: The value is determined by comparing objects which are property for sale. The more comparable objects are used, the more accurate is the value of the property to be sold. Since the procedure is based on concrete property values of real sales, it represents the current market particularly well.

Application: The ideal case is of course the direct comparison. What does this mean? For example, a property has recently been sold in the neighborhood that has a very similar location, size, purpose of use, etc. Generally, the procedure can be applied to all properties. The decisive factor is the availability of sufficient information for a real comparison.

3. Important factors that influence the value of the real estate

Location, location, location:

Location and surroundings: They are the measure of all things when it comes to the value of a property. Specifically, a distinction is made between macro-location and micro-location. The macro-location is defined by the indirect environment such as country, region, city or district. On the other hand, the micro-location describes the character of the property surroundings, such as neighborhood and infrastructure, etc.

Conclusion: The various factors resulting from the macro- and micro-location—infrastructure, public transportation, travel distance to the city center, educational institutions, shopping facilities, doctors and restaurants—have a direct influence on supply, demand, and the market value of a property.

The size of the property and living space:

Another important influencing factor is the area of the entire property. Depending on the year of construction and the condition of the property, the value of the property can vary considerably. The living space is another determining factor in property valuation. In addition to the actual usable area, the room layout is also important. A further aspect is the degree of modernization already taken place, because extensive renovations create the possibility of generating enormous increases in value.

Age and condition of the property:

Year of construction and condition of a property are important criteria in property valuation. Nowadays, the energetic condition of a building becomes increasingly important. Especially the heating system, thermal insulation as well as the condition of windows and doors can result in a very high or rather low heat demand. Therefore, renovations and refurnishments on different parts of the property have to be considered individually.

Equipment of the property:

The existing equipment of the property also plays an important role. Everything, from floor coverings to sanitary facilities and special equipment features is included in the property valuation. There are different levels of equipment such as simple, medium, upscale and highly upscale furnishings. Various factors such as the method of construction, design and materials used for the building, quality of the facilities (e.g. balconies, terraces, etc.) also effect the equipment assessment of a property.

4. Why is a property valuation necessary?

The valuation of property is often estimated incorrectly:

1. Overestimated listing price: An excessive selling price leads to the potential home buyers stepping back from purchasing and subsequently results in the delay of the entire home selling process. In some cases, this can take several months or even years. This causes the risk of ultimately entering the market with a very low selling price.
2. Underestimated listing price: A selling price that is too low which is below the market value leads to a loss of value of the property. This may also cause uncertainty toward potential home buyers. For this reason, a realistic property valuation is absolutely essential in order for the real estate sellers to possibly reach the maximum selling price.

It is very important for both, real estate sellers and potential home buyers to make a realistic assessment of the current market value of a property.

In practice, the listing price on an advertisement may be similar, but this should be considered individually.

A certain room for negotiation can have a positive impact on purchasing behavior of the potential home buyers. It is a key point to attract potential home buyers by not setting an overestimated value in the beginning. However, it is important not to deviate too far from the actual market value of the property since it will be difficult to increase the value later on.

5. Five steps of our property valuation

Theoretically determined key figures, such as the comparative value/earnings and material value, reflect the basic data of a property. These include age, size, land area, modernization measures, etc.

Generally, the market value of a property is strongly dependent on supply and demand in the housing market. This basically determines the market price because the elastic factor of demand is determined by the potential home buyers.

As a certified real estate appraisal expert with many years of experience, KBC Real Estate is able to provide you with individual advice and help you determine the best possible value for your property. Our professional expertise enables us to competently assess whether the market value is a positive basis or whether a correction of the valuation is necessary.

First, we offer you a free appraisal of your property. Our clients will benefit from reliable expertise and receive relevant information for their decisions:

1. We carry out the initial consultation with the home sellers to gather basic information (e.g. location, size, age of the property, etc.).
2. We provide further information regarding the property such as energy performance certificate, property costs and statements/records of the owners' meetings. If the property is for a renting purpose, the rental contract should be available for the tenant.
3. We make an appointment with the home seller for property inspection and evaluation.
4. We calculate the optimal value of the property with you.
5. We achieve the best market value for your property based on our in-depth knowledge of the local housing market and assertive experience.

According to our valuation report, you receive the basic information for the decision-making process of the market value. Afterwards, we formulate an individual marketing strategy together and define a time schedule for implementation.