how to determine the market value of a property

In Buying Property - Asked by Alison J. - Jun 5, 2013
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Answer(s)

Rob M.
Lender/Mortgage Broker
Houston, TX

Knowledge of your market, good information and understanding how to analyze that information. Get an agent that specializes in commercial real estate for a commercial transaction. A part time or resimmercial agent will not do, you don't go to a hair dresser for a heart transplant.
Mahalo

Jun 8, 2013
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Michael C.
Broker/Agent
San Leandro, CA

Value Is Usually Determined by:
Comparative market analysis for 1-4 Residential units of similar type properties, in close proximity to the subject property. These properties qualify for residential financing.
Larger Residential Income Properties, Single Use & Multi-Use Retail Commercial, Considered Commercial, and Utilize Commercial Financing, are Valued Based Upon "Cap Rate" or Capitalization Rate.
Many Factors contribute to the determination of value.
Consider items like: Rent, Income from Parking, Laundry, Signage, etc
Other items to Consider Include Vacancy Factor, Operating Expenses, Advertising, Property Maintenance, Leases- how long are they, Insurance, Who pay for Minor & Major Repairs, Common Area Maintenance.
N, NN, NNN-called triple net, Determines Who Pays for What, Landlord or Tenant.
Debt Service-how large of a loan on the property, Amount of Mortgage Payments.
Then consider cash flow before taxes, effects of taxes & depreciation, cash flow after taxes.
This is a very simplified answer, there are formulas to calculate all the items making up income & expenses.
Other type of Properties such as Vacant Land, that may not Produce Income would depend upon their Use, Potential Use, Zoning, etc.
Depending upon the Type of Property you are Considering, You may be able to Find Properties & Cap Rates for your Community right On This Site.
Be sure to Consider Using the Services of Professionals When Possible.
An Appraiser can Provide you with an Actual Value if Necessary.

Jun 10, 2013
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Eulene C.
Broker/Agent
Bonita Springs, FL

Appraisal is not a science but a price opinion. The value of a property is in the eyes of beholders (buyers, sellers and appraisers). In general, without getting into details, take the past 6-month closed sales and currently available inventories of similar type of properties in close proximity. Evaluate the number, the property condition and, most importantly, the current market condition. The value can fluctuate based on the supply and demand at the time when you do the evaluation. I have sold properties with US$50K - US$70K difference in the appraised value on the same property. Listing agent can play an important role on determining the value and convincing the appraiser either bringing the value significantly higher or lower.

Jun 13, 2013
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Timothy C.
Broker/Agent
Chesapeake, VA

Depends on the type of property. If income property, then primary valuation will be income analysis approach. What is the vacancy and naturalized vacancy of the property and the type of properties in the area (market vacancy)? What are the revenues? the operating expenses? Debt service doesn't come into play on valuing the property, especially as each purchaser is going to have different debt. Hire a good commercial agent, such as a CCIM, to help you. Rob M., great advice!

Jun 14, 2013
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