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The importance of having the right approach to determining the current value of a property highlights the fact that nearly one in two property owners overestimate the value of their property by up to forty percent, leading to somewhat unrealistic expectations of prices to be achieved in the sale. But what is the right yardstick by which the value of a property can be determined? Which properties and factors influence the market value? The following article by your real estate agent Engel & Völkers Switzerland answers these questions in order to clarify the background and logic of the well-founded price assessment.
Value, price and cost of a property: important differences that you should know
There is often an uncertainty about the economic dimensions that are taken into consideration when analyzing a house or apartment. From an economic perspective, the cost of a property means all the sums needed to build it, such as building materials, design or services. Based on this information, the price of the object is composed of these original costs and a variable profit margin. It represents the sum that is called for the acquisition of the house or apartment in Switzerland. The market value as a third dimension should, depending on the priority, correspond to the highest or fastest achievable price that the property can be sold for on the functioning real estate market. In addition to the objective market value, the subjective utility value of a property that varies from person to person must also be taken into account.
What does the market value of a house or apartment really look like?
The usual criteria used to determine the market value are the location, the view, the accessibility, the building substance and the age of the property, often in conjunction with the current equipment level of the property. Three methods for value estimation have proven themselves in the past: The comparison method is based on the prices of actually sold objects of similar quality, so it has to be interpreted as very market-oriented. In addition, Engel & Völkers also determines the market value with a hedonic valuation tool, which is based on a proven statistical method and is also used by banks for real estate financing. These methods are complemented by the real value method: Here, the original costs of land, buildings, equipment, etc. are focused and calculated to the final real value, taking into account the age depreciation for the building. This strongly object-related investigation method can not exceed the original investment sum at the origin and therefore, in case of misuse, carries the risk of resulting in profit losses at the time of the sale.
We know that every property is unique
Depending on who creates the estimate, which method is used to evaluate and for the evaluation purpose, different values are possible. Therefore, the valuation of a property requires the highest level of experience and expertise. Together with you we determine the current price of your property using the correct valuation method. Trust Engel & Völkers – our expertise pays off for you.