The market value of a Property Valuation is defined as the most probable price that it is possible to obtain, on a given date, on a market open to competition and where each party is correctly informed.
The method most commonly used to determine this value is the comparables method . This is the best way to produce an analysis simply and quickly .
It consists of comparing the Property Valuation to be valued with other properties of the same type, recently sold in the neighborhood or municipality . By assessing certain criteria, the chartered appraiser or the real estate broker will target comparable properties for the assessment. From a selection of three to ten buildings , it will be possible to make an estimate based on the sale prices observed.
Here is a list of characteristics that will be analyzed to select the comparables:
- the year of construction;
- land area and living area;
- the number of floors and the number of rooms;
- the presence of a swimming pool;
- the quality of the finishes;
- the presence of a garage;
- the exterior condition of the Property Valuation.
As two properties are very rarely identical, it will be essential to make adjustments , determining the contributing value of each of the characteristics. These defined amounts will be added or subtracted from the comparison price to bring the comparables down to the level of the Property Valuation being appraised.
For example, if the house selected as comparable has a garage and yours does not or, conversely, if your house has a swimming pool but the house selected as comparable does not.
Once this operation is completed, it will be possible to average the selling prices to determine the market value of the assessed Property Valuation.
The comparables method has the advantage of being based on the reality of the real estate market . It provides direct proof of market value. It is particularly used to assess the value of properties for residential use or vacant land.