The Ups & Downs Of How Much A Property Is Worth
How is the fair market value of a real estate property determined? Determining Fair Market Value is an unending struggle and major balancing act when it comes to value real estate explains Rainer Stenzhorn of In2assets, the national property company.
How is the fair market value of a real estate property determined?
Determining Fair Market Value is an unending struggle and major balancing act when it comes to value real estate explains Rainer Stenzhorn of In2assets, the national property company. The reason is mostly because buyers want a property to be valued on the low side—to keep the purchase price down, whilst sellers want the same property to be considered on the high side—to achieve a higher purchase price. And then you’ve got the owners of property—who also want the appraisal to be on the low side, in order to keep the property taxes down.
So, with all these different agendas and points of view, how is the fair market value of a real estate property determined?
Once a year, your municipality sends all area property owner’s official notices that put a Rand value on their property and property rates and taxes are based on those Rand values. But before those notices get sent out, a long, detailed process usually takes place to put a value to individual properties. This is called the market value, but market value is theory and becomes only a fact once a property is sold.
In a perfect world, you have to have a willing buyer and a willing seller. Neither is under duress. Both are in a position to maximize gain and are trying to do this. But in the real world, things are rarely that simple and equally balanced. This is why people feel differently about the appraisal value of a property. It really depends how strong their position, is as a buyer or seller.
Does the local economy come into it at all? You bet it does.
Ask a successful Real Estate Agent about that! He or she will tell you they’ve noticed that Durban’s fast-growing economy is attracting people from other areas who consider real estate here a bargain. That helps fuel increases in property values and supports the supply and demand theory.
The best way to determine real value is via the auction process, which is a competitive environment. The property will be sold to the person that is landing the bid, ends Stenzhorn.