Importance of Valuation of Land & Buildings

If you are buying are selling a house, the mortgage provider often requires an appraisal of the property. Appraisals not only benefit lenders, but may also assist individuals when gauging an appropriate asking price. Moreover, real estate investors rigorously use property valuations for determining the long-term investment potential of land or buildings.

Buying

Getting a property appraised before buying it will give you an idea of how competitive the price is. If an appraisal finds that a property is valued above its selling price, then it is likely that the property presents a good value for the money. Furthermore, an appraisal is required by your mortgage provider. Lenders need to know if the home being purchased is valued at an amount comparable to the selling price. This will not only ensure that you do not overpay for the property, but will also protect the bank from any risks in case of mortgage default.

Selling

It is also important to get a good valuation on your property before selling it. A well-appraised house will give you a good idea of which selling price to offer. A house that is priced well under its value will result in you receiving less money than what it's worth, and a house that is overpriced may result in your property being on the market for a lot longer than you wished for. Any appraisal before selling should take into account the value of new properties being built in the area as well as existing ones.

Commercial Real Estate Investment

If you are seeking an investment opportunity in real estate, getting any property valued before purchasing will not only ensure that you are paying for what it's worth, but will also ensure that you are getting an adequate return for the amount of capital you initially put down. This is especially true with commercial real estate investment, where property is bought with the intention of leasing it on to third parties. Obtaining an adequate level of rent with respect to the price paid is one of the most important concepts in real estate investment. Appraisals are also necessary for tax assessments.

Market Trends

Real estate valuation may be performed on a much larger scale by analysts and economists. Trends in property prices may not necessarily reflect the value of real estate, and such issues may lead to property bubbles. This information is used by governments, financial institutions and lenders when determining policy and interest rates. Such trends may also have an impact on real estate investment professionals who have a long-term interest in the value of the property market.

References

• "The Wall Street Journal"; Five Tips for Getting Your home Appraised Before Selling; Amy Hoak; July 2006
• Third Federal Bank; Why Does a Bank Appraise a Home Before I Buy It?; Albert Paul; October 2010
• The Real Estate Briefings; The Importance of Home Appraisals; October 2010
• Commercial Banc; Learn How to Quickly Determine the Value of a Commercial Property; September 2006