An Overview

The Comparable Sales Method focuses on market data of sales of similar property in a recent time period and thus gives an estimate of which price is adequate for a particular kind of property. Sales comparisons can easily be performed by the layman using internet databases of property transactions. The advantage of this method is that it reflects the actual market prices, but it neglects whether or not a property investment is profitable for seller and buyer.

The Income Approach concentrates on the profitability of a property investment. It analyses the present worth of projected future net income and anticipated future re-sale value. This method gives a good appraisal of whether a certain property is worth its price to the buyer, but it neglects the relation to the overall market.

In order to obtain a good estimate of value for a property it is necessary to employ both the Comparable Sales and Income Methods.

Conclusion

It should be clear by now that there is no perfect method of assessing the value of a property. Appraisal is an art as much as a science, and in the end it is supply and demand which determine the actual selling price of a house.

Nevertheless, the methods discussed above provide guidelines for home sellers on how to estimate the approximate worth of your house - both to yourselves and to potential buyers. By performing an independent valuation, you will be able to set a reasonable asking price for your house - reasonable in terms of both market conditions and your personal financial needs.

You should keep in mind that potential buyers usually perform their own valuations and are thus likely to be able to spot an over- or under-valued property. Furthermore, you cannot predict whether you will be lucky enough to find buyers needing a house exactly like yours after a short while, or whether your ad might still be in the paper after two months. In the end, no valuation can tell you what you will get for your house. This matter is decided by the forces of the free market. But a valuation provides you with a good prediction of what to expect.