Home or property buyers consider a wide range of parameters before they single out one house or property for purchase. Property selection parameters may vary from one individual to the other based on their choices and preferences. However, some of the most common parameters that a buyers consider may include:
- location of property – rural, semi-urban, urban or metropolitan
- size – carpet area, built-up area, super built-up area
- number of bedrooms with bathrooms – 2, 3, 4 bedrooms with attach bathrooms
- direction – park facing, pool facing, sun facing
- type – flat, apartment, condominium, floor or independent house
- legal status of colony in which property is located – authorised or unauthorised or laal dora
- category – luxury or affordable or normal
- floor – low rise or high-rise building
- amenities – swimming pool, gyms or community hall
- proximity to market, school or hospital
- accessibility via public transport like metro rail, bus, auto (3-wheeler), manual or e-rickshaw
- availability to home loans
Depending upon the permutations and combinations of above-mentioned parameters, buyers generally are able to shortlist the most feasible options out of which they would generally zero down to one option for purchase. Ultimately, the mother of all factors – budget – also supersedes the choices we make and helps a buyer in pickup up one of the shortlisted options for buying.
While several factors are considered, the buyers are generally not bothered about the actual value of the property or house they want to buy. The biggest disadvantage of ignoring the valuation of a house or property mostly leads to buyer ending up paying a higher price to the seller. In this post, we share more details on the importance of correct property valuation, methods used and other related information that a buyer must know before making a property purchase decision.
What is property valuation and the process involved?
This is a scientific method of properly ascertaining the near-correct value of a house or property. There are specialised real-estate experts who conduct property valuations especially when a buyer plan to buy a property by taking a home loan.
As part of the property valuation process where a technical expert – a qualified architect usually called as the property surveyor – physically visits the property under consideration. During the site visit, the valuator takes measurements of all the rooms, bathrooms, toilets, kitchen, balconies, etc. using specialised technical measurement equipment. This process may also include creating a structural drawing of the property, counting the number of windows, doors, electrical points and plumbing points in the said property. The valuator also takes photographs of the entire property that acts as a proof of immovable property existence. Post taking the measurements on site, the valuator creates a detailed property valuation report mentioning the true value of the property.
The biggest benefit any buyer can reap from this process is that the buyer gets a fair idea of the near actual value of the property and he or she is in a better position to negotiate with the seller while closing the deal.
What are the factors on which valuation of a property depends?
There are several general factors on which the valuation of a house or property depends. They are:
- Property size – generally represented in square feet or square meters
- Floor plan – 3 bedrooms with 2 bathrooms or 4 bedrooms with 4 bathrooms
- Alterations made – any extensions or improvements done
- Condition of property – well maintained or poorly maintained
- Age – New construction or old construction
- Market situation – more supply and less demand or vice versa
- Location – rural, semi-urban, urban or metropolitan
What are the methods used for property valuation?
Calculating a proper value of property is a complex task. It is in the best interest of the buyer and seller to take professional help of a qualified property valuation consultant for conducting the evaluation. The most commonly used property valuation methods are as follows:
- Comparison method
In this method, evaluator compares the current market value of properties in a particular area and then creates the valuation report. Here the buyer buys a property for staying in it.
- Profit method
This method is usually followed when a property is being purchased by a company. Here, the evaluator calculates the valuation based on income and expenses of the company.
- Residual method
This method is followed when a buyer buys a property for investment purposes. Evaluator considers the possible profits that a property may yield in future.
- Cost Method
In this method, evaluator considers the average cost of buying a land and building a property on it. The evaluator then uses this for comparison with existing properties in a particular area for arriving at the fair value of the property under consideration.
What is the role of a property valuator?
The state law clearly defines the guidelines and methods for conducting a proper valuation of a property. It also mentions that a qualified property surveyor should conduct the valuation as per the process laid by law. Hence, it becomes advisable for a buyer to get the property surveyed and evaluated correctly. The government may view any miscalculation done by the buyer as an attempt to under value the property for evading government taxes, stamp duty and registration charges. Such under-valuations, once detected by the competent authority, may lead to unwanted and unpleasant legal hassles for the owner of the house or property.
Hence, it becomes all the more imperative to employ a competent surveyor or property valuator for conducting the valuation as per guidelines. In today’s times, more and more new age buyers are opting for such professional services that being are offered by property surveyors and consultants.
You can connect with a LegalKart verified property valuator to ask all questions that you may have.