How do you define the price of a property?

How to sell real estate at a fair price and without sacrificing profit? For this you need to do well the task of assigning a price to a property or real estate. This depends on getting a fair value that speeds up the sale of the property, while receiving the proper return on the transaction.

How do you define the price of a property?

Globally, the allocation of property prices depends on different variables that are linked to both the physical conditions of the property and the market.

Some of the variables that are taken into account by professionals to set prices in the real estate market are:

  • Physical conditions of the property: square meters, built area, finishes, services, useful life, among others.
  • Use of the property: we check if it will be used for commercial or residential purposes. In the case of commercial goods, the price increases.
  • Socio-economic level of its location: in some countries it is measured by the stratum, being those with the highest stratum the ones with the highest price.
  • Dynamics of supply and demand: here a differential price is set in relation to the dynamics of the market, with the most demanded properties and those with the lowest supply being the ones that can have the highest price.
  • Opportunity rate: linked to the return on the value of the property in its future sale or rent. The goods that have a higher projection in the opportunity rate represent a higher price. For example, the plans of works in the sector or the opportunities of improvement in the same good, that represent a better quality of life, are equivalent to a greater rate of opportunity and valorization.

Generally, in order to assign the price to a property, be it commercial, residential or industrial, a commercial appraisal is required, completed by professionals in expertise, duly registered and certified for their exercise.

Also, there is the price index fixed by the cadastral appraisal, however, this is generally below the real value of buying and selling real estate. This is mainly because it does not consider all the variables involved in the commercial appraisal.

Recommended Methods for Assigning a Price to a Property

In any case, the fixing of the sale price of a property must be meticulous, taking care that the interests of bidders, buyers and real estate sellers are obtained satisfactorily.

Methods used by professionals to extent as an intermediary between the bidder and the plaintiff:

  • Method of government statistical data and price indices

Make use of the data thrown by the cadastral entities of each country, in which you can see the sale prices of each property.

According to the register of each country, price analysis can be carried out per square metre, in certain areas or strata and types of properties:

  • Building
  • Home
  • Lot
  • Workshop
  • Location
  • Land, etc.

It is also useful to check with national banks and lenders the amount of mortgages made on properties with identical or similar characteristics.

  • Repeated sales method

This method is applicable to old or used properties, because it consists of reviewing the resale price of the same property in different periods of time. In this way, the fluctuations presented at an individual and specific level of each real estate are identified.

However, this should be complemented by methods that complement its accuracy, such as valuation methods, established by real estate price indices delivered by statistical authorities.

Another method that complements that of repeated sales is that of stratification, in which a sample of properties in a given market sector is taken into account in order to obtain an average selling price per square metre.

  • Use of metadata and digital resources

There are agencies dedicated to the real estate market, and even digital platforms that serve as a bridge to quickly understand the dynamics of the real estate market at a local and global level. This is due to the quantity and quality of the metadata stored in their databases.

Another source of data to assign a price to a property is the MLS (Multiple Listing Service), conformed thanks to the collaborative work between professionals and companies of the real estate sector in the world.

Assigning a price to a property is one of the bases for successful real estate transactions, in which both bidders and buyers and sellers benefit.

Doing it right is possible with the methods used in the guild worldwide, such as the analysis of price indices and government statistics, the system of repeat sales and metadata analysis thrown by specialized digital platforms.

Doyle L. Scott

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