What is the Valuation of Home? How is it Done?

Valuation of Home

If you want to know the value of your house, there are numerous methods you can employ. Let’s find out more.

Calculating the ongoing marketable cost of a property is termed the valuation of a building or property. The building type, structure, durability, location, size, shape, types, quality of building materials used and the cost of these materials, the width of roads, and frontage are the determiners of the valuation of a building.

The purchase demands also influence the valuation of homes, which changes daily. The higher the demand for the property, the more valuable it is. Moreover, the areas where buildings equip with proper municipal water supply, sewer and electricity are valued higher. The value of a property is higher on freehold land than on properties constructed on leasehold land.

What Factors Affect the Value of Property

Location of the Property

The location also plays a major role in ascertaining your property’s value. The value of houses in or near cities is more valuable than those away from the population.

Buyers are mostly interested in areas with markets, utilities, good schools, hospitals, restaurants, and so on when looking for a house. Also, your house will gain more value if it connects to public transportation, tourist destinations, offices, or any major highway.

Other Properties to Compare

When the sale price of your neighbourhood houses with similar characteristics is comparable, to determine the right market value of your home, you can analyze the market by taking the help of the most recent sales. You can use an experienced realtor’s help to determine your home’s price by assessing the nearby comparables.

Condition and Dimensions of the House

In determining the market value of your property, the age, condition, and features of your house play a huge role. Usually, new houses with proper renovations and modern facilities fetch a higher price. In addition, the total area of your house and the availability of space is also crucial. Also, homes with more bedrooms, bathrooms, and larger living areas will fetch a higher price.

Similarly, the upgrades and updates like a modern kitchen or the latest fittings and lighting in the house are also important factors in determining your property’s worth. But, these improvements should be made by overviewing the market’s demand to gain greater investment returns.

Market Demand of the Property

Suppose your house is in its best condition in a secure neighbourhood. The available supply and demand of properties will still influence home valuation. If the market in your locality cannot satisfy the high demands, then the market value of your house will go up, and vice versa.

For example, people might be unable to afford a home if their purchasing power decreases. Thus, you must keep up with these upcoming changes to determine the correct value for your house.

Why Should the Property Get Valued?

One of the major reasons for the need to get your property valued is if you have been thinking of selling. It will also give you a rough overview of the value of your property and whether it is the right time to put it on the market. However, there are other reasons why there is a need for home valuation.

For Valuation of Mortgage

The first thing your mortgage lender will require is a property valuation, in case you are buying a property and have had an offer that the seller has accepted.

The total value of the property and whether it covers the amount of money they are loaning you as a mortgage needs to be known by the lender – so that they see the possibility of getting it back.

Usually, this kind of valuation is a quick process, and unlike any proper survey where a surveyor looks closely at the property, here, there is no such process.

For the Valuation of Probate

You may have to have the property valued if your family member dies so that any inheritance tax due can calculate. It is the main method to consider while buying or selling property.

For the Valuation of Matrimony

In case a divorce occurs between a couple, the valuation of the married couple’s jointly brought together or the property owned before marriage. This needs to determine how many assets both parties should receive.

For Valuation of Tax

A valuation needs to calculate how much tax is due if a property is subject to capital gain tax. Since capital gains tax is quite complicated, you should always take the help of a professional surveyor/valuer.

For the Valuation of Insurance

To establish the insurance value of your home, sometimes a more detailed valuation is needed for building insurance policies. It would come in handy if your property gets destroyed and the rebuilding costs have exceeded the average construction price of the market.

Methods of Valuation of Properties and Buildings

Here are the different methods of valuation of home:

  • Direct comparison with a capital value
  • Profit-based Valuation
  • Rental method of valuation
  • Valuation on cost
  • Developing assessment methods
  • Depreciation method of valuation

Direct Comparison with Capital Value

When the rental value is unknown, this direct comparison method with the capital value of a nearby, comparable property uses. This method considers sales evidence and ensures property sold is similar or identical.

Profit-based Valuation

This method’s commercial properties include hotels, restaurants, shops, offices, malls, theatres, and more. In these situations, the gross revenue reduces by all expenditures and expenses to obtain the yearly net income from the assessment. You may calculate the value of a building or piece of property by dividing net income by the year of purchase. The valuation of home, in this instance, can be excessive compared to the real cost of the building.

Rental Method of Valuation

This approach determines the building’s net revenue by subtracting all expenses from gross rent. An acceptable market-prevailing interest rate is assumed to compute the value of the year’s purchase (Y.P.). Take a 5% interest rate as an example; the year would be 100/5, or 20 years.

The net revenue is multiplied by the year of acquisition to arrive at the property’s capitalized worth or valuation. This strategy uses only when the rent is known or when enquiries indicate the expected rent.

Valuation on Cost

The asset value establishes using the actual cost of creating the work or the cost expended to own the work. The appropriate depreciation is permitted, and the obsolescent points take into consideration.

Developing Assessment Method

For properties that are still under development, this approach is appropriate. This strategy splits a big tract of land into lots after placing roads and other utilities on it. Pricing factors in the likely sale price of the property, the amount of space needed for the development, and other development expenses.

The development assessment process applies to assets or structures that require alterations, augmentations, upgrades, etc. Valuation of home is determined based on the anticipated net revenue the building will produce when the renovations get a finish.

Depreciation method of valuation

Residential property valuation divides into four categories based on the depreciation method: roofs, walls, doors, floors, and windows.


Residential property valuations are integral to many conditions, including buying and selling, loan termination, legal issues, refinancing, market valuation, registration tax collection, attorneys’ families, etc. Valuation of home will indicate the location and the banks wishing to lend within the authorized boundaries of their centres and branches. The present values of land, amenities, water supply, and electrical and sanitary installations add to determine the property’s value. It helps buyers know the property’s true value and how much loan they can expect.


What does the residential property valuation indicate?

Residential property valuations will indicate location clearly, and banks like to offer loans inside the legal confines of their hubs and branches.

What is the need for a valuation?

Valuation is crucial to understanding the property accurately, whether you are a buyer or seller. It will enable you and the other party to understand the worth of the property before purchasing or selling it.

How does a property valuer value the property?

Property valuers are professionals who thoroughly examine the property and then offer a report with a judgement about the property’s value.

Can you value a house for the renovation?

The property’s value determines by multiplying the net income by the year of acquisition. Determination of a renovation is necessary; the project value of the property compares to the actual cost of the property, including the overall cost of rehabilitation.

What are the advantages of an online valuation?

An online valuation is the best option if you’re searching for a quick and simple assessment of your property’s value.