Understanding Property Valuation So You Know the Real Cost of Real Estate

Home for SaleWhen shopping for property, whether it’s a new home or a new business location, understanding property valuation is an essential tool. Knowing the real cost of real estate is the one of the advantages a buy can have when preparing to make a bid.

There are a few factors that come into play when talking about the value of a certain piece of property. Real estate value is greatly affected by the times, the social and economic trends, but with a little due diligence you will find the right number.

There are four basic factors of value to take into account. They are as follows:

  1. Demand – Probably the most important of the four, demand is referring to how badly you want that piece of real estate. If it’s in high demand, and a lot of other people want it, then price will go up, but if nobody seems to be interested then price will fall.
  2. Scarcity – How rare or common are similar properties? If the house is a cookie cutter surrounded by a thousand just like it, the price will likely drop. If it is truly one of a kind, then be ready to spend extra for it.
  3. Utility – How useful is the property? A property that better serves the intended use of the buyer may see a slight price increase, where real estate that is less easy to use will be worth less.
  4. Transferability – How hard or easy would it be to transfer ownership of the property from one person to another. If it is relatively easy, then that convenience will likely cost more.

These four basic factors of value apply to any type of product, including real estate. Look at the social and economic trends in the area and see how they affect the four factors listed above. Real estate is often the largest purchase that anyone will make, so it’s very important that you get it right.

Garland & Mason, L.L.C. – New Jersey real estate lawyers


One Response to Understanding Property Valuation So You Know the Real Cost of Real Estate

  1. This is a common issue with divorcing couples and one spouse understanding more about their property’s value than the other. Teaching my clients how to understand just what their marital home is worth will help them get a fairer deal at the negotiation table. I’ll be sure to share this with them so they can be prepared.

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