Real Estate Valuation Methods and Types Buyers Should Know

Real estate valuation can serve many purposes. Beyond buying and selling, it might be necessary for financing, insurance, investment analysis, and more. However, there are different real estate valuation methods. Valuing real estate can be complex since you have to consider the location, size, amenities, and floor plan. Market trends can also impact the value of real estate.

When valuing a property, different methods may provide different insights. This post will cover different valuation methods buyers need to know.

Sarasota Real Estate Market Watch

As of September 2023, the median price per square foot of homes in Sarasota was $301. However, real estate trends are always changing. Contact Living Vogue Real Estate for help buying and selling homes in the Sarasota area.

Types of Real Estate Valuation

Assessed Value

A local tax assessor calculates your property taxes based on your home’s value. The higher the assessed value, the higher the property taxes will be.

Fair Market Value

This type of valuation determines the cost of the home in an open market. Recent sales of similar properties will be a significant factor in this type of valuation.

Appraised Value

An appraisal is a professional assessment of a property’s value. Banks require appraisals for approving mortgages and refinancing. However, they might be important for other real estate transactions as well.

Methods of Valuation

There are various methods for valuing a property. The following are some of the more common approaches:

Sales Comparison Approach

The sales comparison method is also known as the market data approach. Appraisers use this method on single homes and lots. They estimate the property’s value by comparing it with similar properties in the area. The similarities include the size, number of rooms, and age.

Cost Approach

The cost approach offers an alternative to comparing a property to those that are similar in the area. It is particularly useful when there are few to no similar properties nearby. With this approach, the valuation considers the value of the land and the cost of any buildings or improvements. It will take the land’s value and add the construction cost for buildings on the land. The valuation will then adjust for depreciation on the buildings.

Income Capitalization Approach

This method is related to an investor’s required rate of return and the property’s net income. Income-generating properties like apartments, condos, and shopping malls use the Income Capitalization Approach as a basis for future income. With this method, you assess the property’s value as an investment.

The Bottom Line

Real estate valuation tells you the value of a property. However, different methods measure value in different ways.

A Personalized Real Estate Buying and Selling Experience

Buy or sell a home in the Sarasota region with confidence. Our “Quality Over Quantity” approach ensures a high level of service. Please click here for our contact page.

Thanks for visiting!