Real estate

How Properties are Valued in The Real Estate Sector

By 09/06/2021 0 Comments

Introduction

Property valuation remains an integral part of conducting business and development in the real estate sector. It is required in financing of homes and development projects, optimising sales listings, carrying out investment analysis, conducting surveys for insurance, and generating tax revenue for the government. According to one study, accurate and transparent valuation of real estate can lead to a boom in a country’s real estate sector. Companies worldwide are using different technologies and methods for property valuations. With the proliferation of technologies like big data analytics and artificial intelligence, many sectors of the economy have now developed a strong interdependence on each other. Data from multiple organisations can now be collected and merged for deeper insights on multiple fronts. From online tools to artificial intelligence systems, a large variety of products can be found that vary in accuracy and transparency. Continue reading to understand more on how different companies are providing property valuations to their clients and consumers.

Why Need Property Valuation

Besides knowing an estimate price for the buying and selling of real estate, property valuations can be used in a variety of applications. It is important to understand that a property’s value is not the same as its cost or price. Governments usually place legal requirements on the sale and purchase of land. The tax generated on each transaction is in direct proportion to the value of the property. Therefore, property valuations play a key role in determination of stamp duties when transferring ownership between owners, entities, and trusts. Many people invest in real estate commercial properties as they offer higher returns than their residential counterparts. Property valuations are also required by tax agencies to calculate the amount of capital gains accrued at the time of selling any commercial property. Real estate markets are also competitive. An individual also needs property valuations for market assessments to determine a fair market price value (Duong, 2021). Therefore, property valuations have several benefits for buyers, sellers, investors, and regulatory agencies.

How Private Sector Companies Provide Property Valuations

An estate’s value can depend on multiple factors ranging from plot size, location, covered area, curb appeal, and many other indicators which are normally used to define a property’s characteristics. Many businesses are now using the power of artificial intelligence and big data analysis to make comparisons and connections across such a large database of indicators. Property listings on real estate websites have been used to populate a database of indicators. Companies like Zillow, the most popular home estimate site in USA, has over 110 million homes listed on its database. A feature called Zestimate has been included on their website which uses the power of its large database to bring comparisons to users in just a few clicks. Once an address is entered, the system uses certain data points to estimate how much a home will sell in the market. As value of property changes over time, the system also tracks changes over a period of 30 days to 3 years, and can manage to predict a home’s future price by up to 1 year. Zillow updates its database regularly and manages to have an error margin of 1.9 percent. The margin of error largely depends on the accuracy of public records and historical data (Cain, 2021).

Another company named Remax uses estimations from three different sites namely, Eappraisal.com, SmartZip, and Zillow to calculate an average. This saves users the time of checking estimates from different sources and also allows for a lower margin of error. Trulia is another website that offers home estimates from their app. The app offers real time updates on comparables and also has tools like refinance calculator and lender search. Some websites also use data directly from real estate agents and brokers such as realtor.com. The website refreshes information every 15 minutes and allows for a more real time evaluation experience. Collateral analytics is another tool used by the website that supports financial institutions and reputed realtors. The website hosts a remodelling section where an individual can see the impacts of modifications to the value of the property (Seligar, 2015). Therefore, it can be seen that companies in the global real estate sector have used multiple technologies to bring real time and accurate property estimations to consumers. Pakistan can also develop a similar system to streamline its real estate sector by protecting it from real estate bubbles and inflation. Companies like Graana.com, Pakistan’s smartest property portal, are one of the leading examples of innovation in the field of property valuations in Pakistan.

Conclusion

Property valuation is a valuable tool for buyers, sellers, and investors. Getting an accurate estimate of a property greatly enhances transparency in the real estate sector. Malpractices and fraud have become rampant in the real estate sector of Pakistan. Companies like Graana.com are helping revive the real estate sector of Pakistan by introduction of innovative technologies in various aspects of buying, selling, and investing in real estate.

Bibliography

Cain, S. L. (2021). Best Home Estimate Sites. Retrieved from https://www.thebalance.com/best-home-estimate-sites-4843165

Duong, T. (2021). Property valuations: when do you need one? Retrieved from https://www.canstar.com.au/home-loans/property-valuations-tax/

Seligar, A. (2015). How Much is My House Worth? Top 10 Free Home Valuation Tools. Retrieved from https://www.needtosellmyhousefast.com/how-much-is-my-house-worth/

Research Questions

How are different companies carrying out real estate valuations?

What is the scope of property valuation in the global market?

Key Takeaways

Property valuation remains an integral part of conducting business and development in the real estate sector.

It is required in financing of homes and development projects, optimising sales listings, carrying out investment analysis, conducting surveys for insurance, and generating tax revenue for the government.

According to one study, accurate and transparent valuation of real estate can lead to a boom in a country’s real estate sector.

With the proliferation of technologies like big data analytics and artificial intelligence, many sectors of the economy have now developed a strong interdependence on each other. Data from multiple organisations can now be collected and merged for deeper insights on multiple fronts.

Companies like Zillow, the most popular home estimate site in USA, has over 110 million homes listed on its database.

A feature called Zestimate has been included on their website which uses the power of its large database to bring comparisons to users in just a few clicks.

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