EVALUATION OF PROPERTY is the first and the most important step of Real Estate investment because of one SIMPLE reason.
If one doesn’t know how much a property is worth, one can’t buy/sell/rent it.
They will probably end up paying more or less for the property and both of those options have adverse effects on the economy. Apart from those, who don’t know HOW to estimate a property’s value, even those who do face a variety of problems which aren’t easy to solve.
There are three common ways of getting the right evaluation of property.
- Self Estimation
- Real Estate Agents
- Online Real Estate Portal
Each way has its own pros and cons, which you might want to keep in mind if you’re thinking about which road to take.
1. Self Estimation:
Most people who don’t want to spend any money on brokerage or want to sell their property as quickly as possible opt for this option.
In this the seller first makes an assumption that his property has an area of xx sqm.
Then, he calculates the selling rate (INR/sqm) as Price/Area for each property.
The selling rates of all properties should be roughly similar with a variation of maximum 10%.
Then, an average of all the selling rates is multiplied by xx to arrive at the valuation of the property.
This is obviously not the most accurate method as the calculated price is just an average rather than being an exact estimation. Moreover, a lot of factors that affect the sale or purchases of a property are not taken into consideration in this method. This method is more like a rough draft which all investors make BEFORE choosing any other.
- Real Estate Agents
Sellers/buyers/investors often hire these agents or real estate agencies which sell their property for them in exchange of a fee called commission. More than 90% of real estate transactions are carried out with this method as it often appears to be the easy way out. Your real estate will right away give you an evaluation of your property and truth be told, it will be 25% more accurate than the estimation you made yourself. Yet, this option is not the most ideal option. Here is why you should hire a real estate agent and why you should NOT.
|The avoidance of a lot of paperwork and red tape||Having to pay commissions|
|The saving of a lot of time and energy||Being just one of many clients|
|Not having to coordinate repair and upgrading efforts on your own –||Having at least one “middle man’’|
|Having an expert in your local real estate market on your side||Being at the mercy of someone else’s timeline|
|Common fraudulent practices regarding the selling price to get earn more commission|
|Listings will be limited to only that of the agent/agency|
|Lesser control of the transaction|
As you can see when put on a weighing scale, the right side weighs more.
The agent/agency will always treat your property like another file in their office and will never be even half as motivated as the one who hires them. A lot of transactions that go through these agents/agencies do not take place in good faith.
Your agent/agency will give you a value with which they can maximize their profit. If that means giving you a higher value, they won’t hesitate.
- Online Real Estate Portals
Online portals like Magicbricks, CommonFloor, 99acres, Indiaproperty are some of the most popular ones when it comes to real estate.
If you visit any of these websites, you will probably find a tool called a Property Evaluation Calculator which will help you evaluate your property sitting at home just by entering a few details like sqm, BHK, locality name, etc.
It sure sounds tempting but again, it has its flaws too.
If you run a group of properties through all five of these portals, you’re likely to find that each online valuation site will give you a different – sometimes a very different – estimate for the same property. They may not all be using the same comps and each is probably using a different proprietary algorithm that works better with some data sets than with others. So the best advice is that one should not expect to type an address into any of these sites and get back a value that’s carved on a stone tablet.
What you can expect is that, at least with most of these sites, you will get back a good deal of data that you can combine with your own judgment to develop a reasonable idea of a property’s value.
To sum it up, online services, while great sources of information, often strive to offer quick and easy answers to complicated questions. And determining a home’s value is definitely a multilayered problem.
Thus, it is safe to say that Estimation of property is not an easy job. It requires a proper mix of all factors to get the most accurate estimation possible.
Nevertheless, you should definitely give www.myfollo.com a try as their calculator includes a variety of factors that most portals fail to consider. Their estimations are almost accurate and you in this world of real estate where one agency is breathing down on the next of the other, www.myfollo.com proves to be breath of fresh air.