Knowing the value of what you plan to buy is your right as well as your duty before shell out a hefty sum for the same.
A price assessment is the cornerstone of all research work for home buying. There are more than just a few properties in the market that will catch your fancy, but don’t get roped in already for a shocker awaits at the end of that route.
Though there is no definite model of calculation or formula for this assessment, there are some insights that can make the process to the point and the results more accurate than usual.
Here are 5 of them that can hold your hand through this treacherous terrain.
List up the Property Feature
List out each offering to clearly understand if you are getting what is being sold to you.
The things that justify the price of a property are not always structural. There are some abstract and extraneous factors that can heavily expand or shrink the price of a house. One of them is the neighborhood, or the location of the house. So, let’s start at the basics. In a page, make a list of all the basic and advanced features of the house, including the amenities advertised.
Top down, start with the amenities like swimming pool, conservatory, countertops, landscape, fence or block walls, garage, work shed, outhouse, fireplace, etc. Now, move on to the integral features like roof type, year of building, number of bedrooms, size of the house, area in the backyard and such. When you have them all together on one page, you will know it’s worth the salt.
Find Some Matches and Their Prices
Comparing against the properties of similar types can help a great deal.
The second part of the assessment involves looking the area for properties similar to the one in question. You should aim to find at least three matching houses to be able to make an in-depth comparative study. These can be homes that have been sold within the last 6 months or vacant properties waiting to be sold.
Finding a match for the property in question means the houses should be of approximately similar size and must have features closely similar to the one you are assessing.
Compute Out the Sales Price of Similar Properties
The average of similar houses considered after adding or removing the offered or not offered amenities can help you arrive at the figure for which the subject house should be bought.
The prices at which the other properties are sold may not be readily accessible to you. That does not mean you can’t have them. You can roughly calculate it out. Add or subtract an approximate sum from the sales price of the subject house, depending on extra or missing features the other property has to find out the figure at which it was sold.
For instance, if the other house doesn’t have a swimming pool at the back, take out a fictive amount from the asking price to be able to find out how much it was sold for.
The reason why you need this amount is because there is a formula that can help you calculate the estimated price of the property you are interested in. When you add the sales prices of all the houses in question, divide it by the number of houses there are in your study. The quotient is roughly how much the subject house should cost.
The Cost Approach
This can be another mathematical as well as logical way of arriving at the right value of the property in question.
Another way to evaluate a property is the cost approach. Imagine that you have to get some renovations done on this subject property.
Mentally calculate how much you would need to spend to replace one of the structures at today’s rate. Now subtract the depreciation from the final amount and add to the remaining balance the possible market value of the plot. There you have the assessed value of the house.
Property Income Assessment
Income from the house is also indicative of what the property is worth.
A fifth and last value assessment method is to analyze the earning possibilities form the property. Supposing that you are going to rent it, find out how much it will be able to return you every month.
Do take into account miscellany expenses for that venture like operating cost, maintenance cost, insurance, financing and others. Do the math and what you have is the monthly return possible to have from the house.
Multiply that by the number of months it will take you to pay off the home loan. The two should match.
As a sensible buyer who is meticulous in this groundwork, you must first assess the value of the property. The idea is that you should be able to justify the asking price posed by builders and developers in Bangalore with the property in question.