What you Should Know About the Market Value of Real Estate in Cyprus

Estimating the value of your property is an important step. The best way to determine the price of a property is through real estate valuation. If you want to know the basics of real estate valuation, then this article is for you!

Property value

Appraisals are a significant part in determining the value of a property. The benefits of property are generally constructed over a long period of time. The value of a property is determined by economic and social trends. Government regulations or environmental conditions also play a role. 

The four elements to be considered when estimating the value of a property include:

1. Demand – this is a strong incentive to buy and hold.

2. Utility – the most significant factor in real estate. It can be seen as either functional or aesthetic utility.

3. Scarcity – this addresses the concept that there are only a limited amount of competing properties. Finite supplies have made finding an affordable place in today’s market very tough.

4. Transferability – the difficulty in transferring ownership rights is an important factor to consider when deciding on the best type of property for your needs.

The worth of a property is determined by what you can get from it in the future. It’s significant to consider economic and social trends along with any applicable government regulations or environmental conditions.

Value is not the same as cost and price

The cost or price of a property is not necessarily equal to its value. The cost of a property is often measured in terms or actual expenditures, for instance, materials and labor.

The price of a property is the amount that someone pays for it. Value is not determined by cost or price.

An appraisal is a professional estimate of the value of your property. It is the price a property is expected to bring in an open and competitive market. The goal of an appraisal is to determine the market value for a property. 

The market value of a property is not always reflected in the actual sale price. The property may sell below its market value due to the threat of foreclosure. This can also happen if it was sold in a private sale without being exposed to open markets.

The appraisal process

1. Sales comparison approach

The sales comparison approach is a common way to value single-family homes and land. To estimate the value of a home according to this method, it is important to compare it with similar properties. 

The term “comparable” is used when making comparisons between properties. A valid comparison requires that each property must meet certain criteria listed below.

1.1. Make sure it is similar to the subject property in terms of size and shape.

1.2. The property has been sold in an open and competitive market within the last year. 

The more comparable properties there are in a survey, the better. At least three or four should be used for an accurate appraisal of value.

When looking for comparable properties, the most significant factors are size and location. The location of a property can have an immense impact on its market value.

When adjusting the sale prices of properties, differences in features and other factors will be taken into account.

2. Cost approach

With the cost approach, you can estimate how much the entire land or building is worth. This method can be used to value your building and land together or separately. You need to take depreciation into consideration when estimating the worth of each component.

The estimate of the value for all improvements is then calculated. 

With the cost approach, we assume that the buyer would not pay more for an improved property than another comparable one. Then build a structure that is just as desirable and useful. This approach can be used when the property being appraised is not an income producing asset.

There are a variety of ways to estimate building costs. The square-foot method is a simple way to measure it. The cost per square foot is multiplied by the total number of square feet in that building.

3. Income capitalization approach

The income approach is based on how much an investor requires for their rate of return. It also includes the net profit produced by a property. 

It is a popular way to determine the value of properties such as apartment complexes, office buildings and shopping centers. 

Appraisals using this approach can be straightforward. The subject property needs to have a future income and its expenses need to be predictable.

With direct capitalization, you can easily estimate your potential annual gross income. To determine it, take into consideration vacancy and rent collection losses. Then deduct annual operating expenses to calculate the net income.

Estimate the price that investors would pay for income produced by that particular property. Then, use the capitalization rate to calculate the annual net operating income that property can generate. 

Conclusion: Anyone can benefit from understanding the different property appraisal methods

Real estate valuation is an important task for those who want to buy or sell a house, lenders and investors. Anyone can benefit from gaining an understanding of the different methods for performing appraisals.