by Melih Alsaç
Real estate valuation is the process of determining the current market value of a property. This process plays a critical role in real estate transactions, credit assessments and investment decisions. In this article, we will examine the main methods used in real estate valuation and how they are applied.
1. Market Comparison/Equivalent Comparison
Market comparison is one of the most widely used methods to determine the value of a property. This method is based on examining the sales prices of properties with similar characteristics located in the same area. Taking into account the location, size, age and other characteristics of the property, the appraiser analyzes sales data of similar properties and creates a value estimate.
Example:
When valuing an apartment, the prices of apartments of similar size and characteristics sold in the same neighborhood are examined. These prices help determine the market value of the property.
2. Income Approach
The income approach is generally used for commercial real estate and leased properties. In this method, the rental income of the property is analyzed and its value is calculated. In the income approach, the annual rental yield of the property and rental multipliers are taken into consideration. The rental potential of the property is evaluated based on market conditions and rental trends.
Highlights:
- Rent Multiplier It is a multiplier that shows the relationship between the annual rental income of the property and its market value.
- Net Operating Income: The income approach uses the total rental income of the property less expenses.
3. Cost Approach
The cost approach is particularly appropriate for real estate that is newly constructed or has unique characteristics. In this method, a value is determined by taking into account the cost of rebuilding the real estate. The cost approach is based on the sum of land value and construction costs. The appraiser calculates the total market value of the property by evaluating similar land sale prices and construction costs.
Implementation:
For example, when valuing a new detached house, the market value of the house is estimated by adding the land value and the construction costs of the house.
Conclusion:
Real estate valuation is carried out using methods such as market comparison, income approach and cost approach. Using these methods, appraisers determine the fair market value of real estate and provide guidance to property owners, buyers, and financial institutions. These reports ensure that real estate transactions are carried out accurately and reliably.
Frequently Asked Questions (FAQs)
1. What is real estate valuation?
Real estate valuation is a process used to determine the market value of a property. Methods such as market comparison, income approach and cost approach are used in this process.
2. How does the market comparison method work?
In this method, the value of a property is determined by comparing the sale prices of other properties with similar characteristics.
3. For which types of real estate is the income approach appropriate?
The income approach is generally appropriate for commercial real estate and leased properties. A value is calculated based on the rental income of the property.
4. In which cases is the cost approach used?
The cost approach is used particularly for newly constructed properties or properties with unique characteristics. Value is determined by taking into account the cost of rebuilding the property.
