Buying a new property is an overwhelming milestone. When it comes to owning a property, a potential buyer might have multiple factors to rate the top options.
The buyer might put more weight on certain factors more than others based on the type of property it is. For example, it could be a newly constructed property, a rental property or a preleased property, based on which the buyer decides what factors to put more emphasis upon. However, one often forgets to calculate certain factors, which may be due to a lack of knowledge or a slip of the mind.
This article can be considered a checklist for a buyer looking to invest in a property. It can also be a guide for the seller to evaluate the property based on the general market scenario.
Size And Usable Space
When estimating the property value, size is an important feature to consider as in general, a bigger space has a positive impact on the valuation of the property. The property value is estimated based on the square feet area. In addition to this, the usable space matters when determining the value. The liveable space is what counts for the buyer.
In terms of a residential property loft, garage, or unfinished basement cannot be considered usable space. However, for a commercial space, the shared areas used by all tenants are considered usable space. It includes the restrooms, lobby and hallway.
Supply And Demand
The basic law of economics applies to real estate also. It is also volatile with time. When a particular location gains more population, the demand in the area and the ones nearby increases.
More residential and commercial are likely to be established in the area. However, due to the limited supply, there will be an increase in the property value. Similarly, on the other hand, there might be ample opportunities in certain areas but the demand might be less which will lead to a lower price in those areas.
Any property located in a commercial/market area can fetch a high value at any time for its location. Even the brokers/ realtors quote a higher price for the buildings in a well-developed area when compared to their counterparts. The properties in the upcoming areas do take time to gain a better value and once the location gets mature, the price goes down gradually.
When considering a residential property, the buyer might take into account things like education quality, employment scope, proximity to shopping centres, malls, theatres etc. These factors can influence the neighbourhood’s value. Similarly, the proximity to highways and public transit also plays an important role in fixing the property value.
The valuation of the property is also influenced by the infrastructure. A property with modern amenities is costlier than one with an average amenity.
One of the most important features for valuing your property is the selling price of similar properties in the surrounding. In real estate terms, these properties are known as ‘comps’. However, no two comps are the same and thus making it difficult to conclude.
Top real estate companies calculate this digitally. They combine a robust data model which can analyse several properties in a specific area and give insights into the same.
Age And Condition
New properties appraise at a high value. This is because parts like electrical fitting, plumbing, fixed appliances, etc. are less likely to break down as it is new. This generates savings for the buyer. Buyers will be ready to pay a bit more for a ready-to-move-in property. They tend to negotiate the repairs to avoid the major expenses post-purchase.
This is important, especially with older properties that might have outdated features. The impact of the project upgrading can vary based on the market and the project construction. Upgrades like a pool or wooden floors can fetch more value, but won’t attract many buyers. Whereas, upgrades like kitchen remodelling or adding full bathrooms have a better chance to attract more buyers.
The housing market is much more likely to be affected by a slower economic condition, where the person’s ability to buy or sell a home is less. At the same time when employment is on the lower side, only a few people can afford a newer property.
Keep in the mind the current status of the price appreciation in the area, and then evaluate the best time to sell your property.
Population change is one of the most influencing factors in property valuation. We can also say that property valuation is directly proportional to the level of disposable income.
Remember that barren land is appreciated due to its limited supply. Of course, no one is producing more land. But when it comes to constructed properties, there exists a scope for renovating them over a while as required. Also, remember that even though the value is derived on the whole considering the market scenario, the final decision could be personal or based on the type of real estate investment that the buyer intends to make.