Types of Real Estate Value

Instructor: Tara Schofield

Tara received her MBA from Adams State University and is currently working on her DBA from California Southern University. She spent 11 years as a sales and marketing executive. She spent several years with Western Governor's University as a faculty member. Tara has been at Study.com for seven years.

There are many ways to determine the value of real estate. Learn how to help your sellers and buyers determine a fair price for the property they are selling or buying.

What Is Real Estate Value?

Every piece of real estate has a value or an amount that buyers are likely willing to pay for it. Your job as an agent is to help your sellers determine a reasonable price to ask for their property that is in alignment with other similar properties and what an appraiser would say the house is worth. On the other hand, you also need to help your buyers determine a fair offer price for a property they want to buy. Let's look at some ways you can determine real estate values.

Market Value

The most common valuation method is market value, the amount that a property is worth based on what similar properties in the area have recently sold for and what buyers will pay for it. If you are listing a property, you want to determine the market value by looking at recent sales and properties with the same basic features as your listing. You can make adjustments for differences between properties or recent changes in the market.

For instance, if your home has a finished basement and the comparable properties do not, your home will be worth more than the comps. Or if there has been an increase in demand for homes in the last 30 days, your property may be worth more than a comparable property that was sold 60 days before. The key to market value is that your property is worth what buyers are willing to pay for it.

Investment Value

Investment value is what a specific investor believes a property is worth. Let's say your client, Tim, is looking at a property that meets his criteria for an investment: it's a commercial property in a high-traffic area, he can add on to the building and create four more office complexes, and he can get financing on the property. This investment has more value to him than to an investor who only wants to invest in apartment complexes. Tim may pay more than another investor for this property because it fits his needs.

Assessed Value

Every property has property taxes that the owner must pay. The amount of taxes due is based on the assessed value, the value the tax department places on the real estate that is used to calculate the amount of taxes due. Typically, the department will take the market value of your home and multiply it by a percentage to get the assessed value.

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