Commercial property valuation

Commercial property valuation is when a property is given a value according to how it looks like and what condition its in. Estimating the value of a property is vital to a variety of endeavors, including real estate financing, listing real estate for sale, investment analysis, property insurance and the taxation of real estate. For most people, determining the asking or purchase price of a property is the most useful application of real estate valuation. We will run you through different concepts of property valuation.

Valuation Concepts

Value

A main consideration in appraising is to determine a property’s value: the present worth of future benefits arising from the ownership of real property. Unlike many consumer goods that are quickly used, the benefits of real property are generally realized over a long period of time. Therefore, an estimate of a property’s value must take into consideration economic and social trends, as well as governmental controls or regulations and environmental conditions that may influence the four elements of value:

 

• Demand – the desire or need for ownership supported by the financial means to satisfy the desire;
• Utility – the ability to satisfy future owners’ desires and needs;
• Scarcity – the finite supply of competing properties and
• Transferability – the ease with which ownership rights are transferred.

Value Vs. Cost and Price

Value is not necessarily equal to cost or price. Cost refers to actual expenditures; for example, materials and labor. Price, on the other hand, is the amount that someone pays for something. While cost and price can affect value, they do not determine value. The sales price of a house might be R500,000,00 but the value could be significantly higher or lower. For instance, if a new owner finds a serious flaw in the house, such as a faulty foundation, the value of the house could be lower than the price.

For more on commercial Property Read: Commercial Property Durban