What Determines Real Estate Price or 7 Questions for a Professional Appraiser
Why is it important to have your real estate appraised before putting it up for sale, and what problems can arise if you don't?
A large proportion of home buyers today use bank loans when concluding a purchase-sale transaction. Therefore, commissioning a professional appraisal (valuation service) before putting real estate up for sale saves time in the later sales process and, on the other hand, by ordering a valuation service, the seller already learns the market value of their property and can offer the property on the market at a market price. However, there is a small nuance here in that credit institutions generally accept professional appraisals that are 3 to 6 months old. Therefore, the timing of ordering the service should always be carefully considered based on the real estate sales period. Of course, a real estate owner can also consult with an appraiser about a possible selling price before the sales process begins and order a professional appraisal (valuation service) later if a potential buyer appears. In essence, a real estate owner is not obligated to order a valuation service before selling the property.
What factors shape the price of real estate?
The golden answer to this question would be location, location, and location again. Location has a very significant impact on real estate prices. For an apartment, in addition to location, the price is influenced by the technical condition of the apartment building, the living space of the apartment, placement on a floor (in older buildings without elevators, top-floor apartments are generally valued less than apartments on lower floors), the technical condition of the apartment, the functionality of space use, the heating system, balconies, and the presence of quality kitchen furniture and utility spaces. For a house, in addition to location, the technical condition of the house, the closed net floor area of the house, the presence of technical networks, the size of the land unit, and the condition of landscaping are equally important, as is the presence of outbuildings and their technical condition. A waterfront (bordering a lake or larger river) adds additional value.
People often think that before putting their home up for sale, they should thoroughly renovate it because then they can ask for a significantly higher price – is there some deep logic to this effort or does it really not add much value in reality?
The possible added value of a thorough renovation in the real estate/property sales process largely depends on what you want to significantly improve on the property before sale and where that property is physically located. A simple example: a run-down apartment in an older panel building in Rõuge parish, Võrumaa and a similar apartment in Viimsi, Harjumaa – the renovation costs are the same, but the real estate selling price after improvements is very different. By renovating a home, an owner can certainly ask for a higher selling price, but it can also happen that some potential buyers don't like the improvements made by the owner at all and the buyer drops out of the purchase. Therefore, it is always prudent to calculate before putting a home up for sale what improvements should be made and at what cost.
Are there still some preparations that a homeowner should do before contacting an appraiser? For example, actions related to paperwork?
Before ordering a valuation service, all paperwork related to the property should be in order. It is also important that the information in public registers (building register, land register, Land Board, etc.) matches reality. Otherwise, the entire process will be delayed later.
Must a home be put up for sale at the price determined in the professional appraisal, or can you ask for more?
Generally, a large proportion of home buyers use bank loan assistance and therefore, by selling real estate at a significantly higher price than the market value stated in the professional appraisal, a situation can arise where a potential buyer does not have a sufficient amount of own funds to cover the difference between the market value appraisal and the sale price to conclude the transaction. In such a situation, the property sale period will certainly be extended. Of course, there are also exceptions and if the purchase interest of a buyer and a possible transaction do not depend solely on a loan, or if the buyer uses mainly or only their own funds for a home purchase, they can pay more than the possible market price if there is some special parameter (for example, the apartment is in a very attractive location or the property has some other added value).
If a person is disappointed with the price determined in the appraisal, is there anything they can do themselves to increase the value of the real estate, or are prices mainly determined by factors beyond the owner's control, such as location?
As mentioned earlier, location largely influences the real estate selling price. However, among the parameters that increase real estate market value, there are also aspects that the property owner can themselves influence (such as condition, the presence and condition of technical networks, etc.). However, for any improvement work, it is always necessary to analyze how great the possible cost of any improvement/renovation work is to the owner and how much it affects the real estate selling price. At the same time, in some improvements, this can make the real estate object much more attractive on the market, so that the associated cost-benefit balance should be disregarded (for example, the presence of sanitary facilities – in older wooden houses, not all apartments may have a toilet-bathroom yet, so building this into the apartment can significantly increase the attractiveness of the real estate object on the market). The visual appearance of any product/item is also important in the sales process.
When purchasing a home, even if you plan to live there permanently, should you still always consider the angle of how profitably you can sell it later if necessary, or is there no point in paying attention to this?
If you start incorporating a profitability factor into the home purchase process, then the home purchase process will probably take a very long time and then you probably should also disregard the emergence of that genuine sense of home. Profitability and a sense of home probably can't go hand in hand. However, conscious and prudent behavior on the market as a buyer or seller can still bring benefits later. It is important to take all possible steps and make decisions with the near future and market developments in mind.
Article source: Arco Vara
