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# How to calculate home appraisal value ?

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# How to calculate home appraisal value ?

06 Şubat 2022, 15:50

How to calculate home appraisal value ?

Three different techniques are used to calculate the appraisal value:

1. peer valuation
2. cost valuation
3. capitalization of revenues

Peer Valuation

The peer valuation technique is also called the "Sales Comparison Method". peer valuation technique; It is based on the assumption that the price a buyer can pay to purchase a property will not be more than the cost of properties with similar characteristics in the market. In order to somehow determine the value of a real estate, the sales of comparable real estates offered for sale in the market are examined. In other words, sales of similar real estates in the market will constitute an indicator. However, in order for this method to give a healthy result, it must be compatible with the characteristics of the indicative real estate, if these characteristics are not compatible, it will not be meaningful to compare the values.

Below are the steps of the peer valuation method:

researching data
validation of data
selection of relevant comparison units
review and correction of peer sales
reconciliation of value indicators on a single value

The real estate prices that can be used in the sales comparison method should deviate by at most 15% from the average value according to international practices.

Cost Valuation
The cost valuation technique is based on the assumption that knowledgeable buyers will not pay a property more than the cost of rebuilding a property with similar characteristics. In this way, the value of the real estate is defined as the sum of the costs of purchasing a plot of land on which the real estate can be built and building the structure on it. The cost valuation technique is generally used for structures whose imputed value cannot be determined or which are of special nature. During the calculation, the depreciation of the building is deducted from the construction cost.

Capitalization of Incomes
Income generating properties are expected to have a regular income stream from their operation throughout their economic life. Rental income is generated throughout the life of the real estate, as well as expenses that will generate cash outflows such as taxes, financing income and renewal expenses. Net income from real estate investment is called “net operating income”. Net operating income is calculated by deducting operating expenses and loan payments from the gross income of the real estate. Net operating income represents the return on investment, and the “Capitalization rate” represents the rate of return. The value of the real estate is calculated by calculating the present value of its income.

In short, there are 3 basic methods when determining the appraisal value. These methods are;

Income Reduction: It covers the income of the house if it is rented and the amount paid for the house in how many years, including the costs, will be returned.

Cost: It is used for real estates that are not common and provide more or less the same benefit. (Factory, hotel, etc.)

Comparison: Looking at the value of a recently sold house with similar characteristics.

VALIDITY PERIOD OF THE EXPERT REPORT ?

First of all, it is necessary to share the following information about this subject. There is no official decision or regulation decision regarding the validity period of the appraisal report. The fact that house prices change depending on many factors and that these factors are very active in the short term also gives information about the duration of the report. The average period for the appraisal report varies between 6 months and 1 year. However, in the system implemented by the banks, a new report is received in the use of credit. However, in this case, it is applied in some exceptional cases. In this context; In the case of a second application to the same bank, or sometimes in the case of more than one bank working with the same appraisal firm (when the report for the other bank is requested to be accepted by this bank), the reports received from this firm are accepted.

Our firm’s knowledgeable, experienced professionals are ready to help you save time on tax compliance and payroll processing and achieve financial security while reaching your goals. If you’re ready for a team member who’s invested in your success, it’s time to meet the staff at VAT FORCES !

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