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PropertyHome sellingSelling a home: what is the market value of a property?
Selling a home

Selling a home: what is the market value of a property?

By Frédéric Papp

17.03.2020

Source: iStock / KatarzynaBialasiewicz

The market value of a property is not necessarily the same as its selling price. Comparis outlines the differences and explains what methods are used to calculate the market value.

  • What is the market value of a property?
  • Is the market value the same as the selling price?
  • What factors affect the market value?
  • What valuation methods are used?
  • How do you calculate the market value?
Obtain home valuation now

What is the market value of a property?

The market value is the price a property can achieve when it is put on the market. It is the result of a property valuation. The price is based chiefly on the land value and the building value. The most important component is the land price. In low-tax regions and areas with a high demand for property, it is usually higher than in less attractive regions.

Is the market value the same as the selling price?

The selling price actually achieved for a house or apartment does not have to match the market value. This price is heavily influenced by supply and demand. If the supply of properties exceeds demand, you can expect the selling price to be lower than the market value. However, if demand for properties exceeds supply, you may achieve a selling price above the market value.

What factors affect the market value?

The value of a property is influenced by various factors. These include:

  • Location and surrounding area of the property
  • Age and general condition of the property
  • Size of the property and its fixtures, fittings and amenities
  • Current level of demand in the area

What valuation methods are used?

There are three main methods of valuation:

1. The real value method focuses on the land value and the current value of the building. It is usually determined by professional appraisers, who charge a fee. The real value method is generally used for luxury or unique properties.

2. The hedonic pricing method is suitable for residential properties for which a large amount of data is available. The value of a specific property is based on the actual sold prices of similar properties in the area. Banks and estate agents usually use hedonic pricing models as they produce valuations that reflect market conditions.

3. The income approach is used to value investment property. It derives the value of a property from the summation of constant and perpetual net rental income.

How do you calculate the market value?

1. Online tools: Homeowners can use online tools to calculate the value of their property free of charge. The calculation is based on factors such as location, living space, year of construction and the condition of the property. This type of valuation tool provides a rough estimate and the basis for a more in-depth appraisal by an expert. You can, for example, use the Comparis property valuation tool to get an estimate of the value of your property in just a few minutes.

2. Expert appraisals: Homeowners often over-estimate the value of their property. Professional appraisers have the necessary expertise to value factors such as the location, condition and any special features of the property appropriately.

3. Estate agent valuations: Professional estate agents are familiar with the market and can use hedonic pricing methods to produce a valuation that reflects market conditions. You can ask the following questions to verify the expertise of an estate agent. If you are planning to sell your home, you can find a Comparis-approved estate agent here. This estate agent will value your property free of charge and support you through the selling process.

Author

Frédéric Papp

Finance expert

media@comparis.ch

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