Real estate property values can be difficult to determine even if you are an experienced agent. For instance there is a difference between the assessed and market value of a home whether you are buying or selling a property. The former is less than the market value which is better for buyers. The market value on the other hand is preferable to sellers.
In other words, the market value is the current value of the property in the market while the assessed value is based on a portion of the appraised value. This is determined according to the applicable taxes that are owed on it. This is usually problematic since most home owners don’t agree with the stated tax figures.
This also includes the demand for the property, how it will be used and the current supply. In other words, the price of real estate doesn’t actually refer to the actual cost or the price of the property. For instance, if a home needs repairs, the assessment value can fall lower than the actual sale price.
Here are some more tasks you should be familiar with to determine the current market value of your home:
Determine Cost Approach
The cost approach covers the estimated property value after changes have been made to it. This includes additional estimates for the land value and the structure after depreciation. The sum of these 2 values results in the overall value of the property.
This option is suitable for properties that don’t generate an income that are sold after an extended period of time such as churches, schools, hospitals etc.
Here is how you can determine property values through the cost approach:
- Get the estimates from the land value
- Get estimates for all of the required costs for the modifications
- Ask for the depreciation amount as per deterioration costs
- Deduct the depreciation value
Take the land value estimate to the appreciated cost of the property into account along with the improvements made.
Contact the tax assessment office
The government keeps a record of all property sales in areas that are under their jurisdiction. These can usually be found in the tax assessment office so you can contact them for it. This includes recent sales in the areas and the neighborhood zip code.
To determine the accurate market conditions, ask them if they will be willing to give you details of all of the properties sold. Besides the selling price, this also includes the date of the sale, square footage, the year the structures were built and the number of bedrooms/bathrooms. You will need that information to make an informed guess on the market price of your property.
Income capitalization approach
This approach involves the relationship between the rate of return by the investor and the income that is produced by the property being sold. This approach is typically used for income generating properties such as office buildings, apartments and other commercial structures.
The appraisal technique that is involved in this approach tends to be more precise. This is understandable since the properties will be used to generate a stable/predictable income after they are bought.
These were just some of the terms that you need to be aware of to determine current market value of real estate properties. To make this easier, look for homes that have been sold in the last 6 months or so. Reject sales that occurred before that time period since they will be too outdated to be of any use.
Michigan Real Estate Continuing Education
If you are a real estate agent or broker in Michigan, you will need to take up to 6 hours of continuing education to maintain your license. That is also a good way to ensure your credibility with buyers and sellers. 360Training.com offers a Michigan Real Estate Continuing Education
package which includes 4 hours of elective credit courses and 2 hours of required legal credit programs. Sign up for the course today to maintain your credibility in the industry.