How to Undertake Home Valuation

How to Undertake Home Valuation

You may be interested in the value of a home that you want to sell, or buy. It is important to understand what goes into the valuation process. Before taking a look at valuation, it is beneficial for you to understand what value is. Essentially, the value of a home is relatively fixed but also lies in the eye of the beholder.

The above statement sounds paradoxical but is true for any real property. In commercial home valuation, there is a flexible range within which you can value your home. Determining the mortgage value is one of the easiest ways to know the value of your home. You can use the following procedure for the valuation. Before proceeding any further it might be worth reading 4 Steps To Take Before Putting Your House On The Market by Pro Plus Home Inspection to see if you’re all ready to make the move to put it on the market first.

Estimated Loan Paid

You need to determine a base price or an estimated value. In many cases, the stated purchase price will give you a better estimate for this figure. You should multiply this price with the inverse of the fraction of value you serviced using mortgage or a similar plan.

As an illustration, if you have paid £500,000 as the mortgage which represents 80% of the total value, the loan will be (100/8x£500, 000 = £625,000). Next, you need to add this figure to your down payment. For instance, if you placed a down payment of £100,000, the estimated value will be £725,000.

Market Forces and Inflation

You need to determine whether your property has gained or lost value since you purchased it. The best way to do this is to compare the estimated value of your home with that of the surrounding property. Once you have a rough estimate of the changes in valuation for the surrounding properties, determine what percentage change in value has occurred.

It is advisable to use the value of homes purchased around the time you bought the house. For instance, if a neighbouring house was purchased at £400,000 and sold off recently at £500,000, you may assume that the property appreciated in spite of the obvious market inflation by a factor of 20%. You can use this factor to estimate the value of your home as (£725,000 x 120% = £870,000).

Conclusion

The above procedure is not accurate since the value of your home will be dependent on numerous factors that cannot be replicated using mathematical formulae. Some factors will increase the value of your home and others will reduce it. For instance, if you have undertaken some improvements in your home such as a garage extension, laying cable, et cetera, you should include the costs in the final estimate.

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