How to Calculate Real Estate Value

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Whether you are looking to buy or sell, calculating the value of a property is essential, in order to ensure that any transactions that are carried out take the true value of the house into account. There are a number of ways in which this can be done, and you can apply whichever seems the most relevant in your case.

Browse through recent comparable listings and sales

The most accurate and most often used method for determining the value of real estate is to look at the recent sales and listings of comparable properties, to get an idea about what the current market value of these sort of properties is. Compare the home to other properties that are similar in terms of community, zoning and taxing authority, and have access to the same medical facilities, schools, and shopping centers. By looking at these, you can get an idea about what your property will fetch on the real estate market. Some other grounds for pinpointing houses which are comparable are:

  • Location – The houses you are comparing to your own should be located in the same area as your property. Houses within a one-mile radius or less of your own property all classify as comparable properties.
  • Size – The houses you compare to your own should have a square footage similar to yours.
  • Bedrooms and bathrooms – Count the number of bedrooms and bathrooms in your own house, and only use houses that contain a similar number of rooms as comparables.

Compare annual rent with sale price

Consider the ratio of the annual rent you can get for the house versus the sale price that is under consideration – this is a lot like a price / earnings ratio which is used for stocks. The P / E for long range housing is 16, so the price you list for your property should be 16 times the annual rent it can generate.

Hire an appraiser

If you do not wish to invest any time or energy of your own, simply hire a professional home appraiser to do the job for you. The appraiser will use most of the above-mentioned techniques, but s/he will also visit your property to give it a professional overview and determine its quality. Using these methods, along with noting the zoning and potential of the plot, plus its replacement value, the appraiser will determine how much the property will go for on the current market.

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