Why would I compare my property to other properties?
In establishing a value comparable ’s are of great importance because it is not an arbitrary value, but one that shows the past history of what a buyer actually paid for a similar property.
For sure you have heard someone telling you how much their vehicle is worth, the value of their piece of jewellery, or a certain collectible item? In order for something to have a particular #value and be worth a certain amount, you first have to have a buyer for it.
The more unique your piece of art or collectible is, the smaller the percentage of buyers you may or may not have; which reduces the chances what someone will pay for it. Therefore the best way to determine value is by means of auction says Rainer Stenzhorn representing in2assets, a leading Property Auction Specialist in South Africa.
In establishing a value comparable ’s are of great importance because it is not an arbitrary value, but one that shows the past history of what a buyer actually paid for a similar property. There is no guess work or prejudice involved; simply the facts and actual numbers of what one buyer paid one seller for their particular piece of real estate. If that doesn’t determine value, I don’t know what does continued Stenzhorn
Sometimes it may appear that houses & properties, neighbourhoods and undeveloped properties sold may be confusing, however if you step back and look intently and over time, you will learn patterns & trends in values of real estate quickly. These patterns and trends can be over a particular time frame, e.g. seasons of the year; a particular style house or a certain position, street or neighbourhood in a town.
As and when you start to see what the norm is, you also see the differences. You can determine when a house is over-priced, or better yet, under-priced and it will literally stick out as a property that when compared to the “comparables” is less than what it should be.
Even though all houses or apartments are unique in one way or the other, on the macro-level they are also commodities. Like a particular 3 bedroom/2 bathroom/ double garage house on 1200 m2 of land with a pool should sell for approximately the same as another identical house on the same street – all things being considered.
The term “all things being considered” is also known rehabilitation costs and what will it take to bring the subject property in line aesthetically with the comparable houses.
At In2assets, we call this process “segmenting the Market and Scanning for Equity “which is the foundation of a proper valuation on real estate and used in every property transaction, closes Stenzhorn