Calculating property value: what is my home worth?

2. How are property values calculated professionally?

Different valuation methods are used depending on the purpose and type of property. Property experts are primarily use the following three methods:

• The hedonic pricing method: in this model, a property’s value is determined by comparing it to similar properties that have been sold. This is how the market value is derived for the hedonic estimate. This model is mainly suitable for standard types of owner-occupied property.

• Capitalized income method / discounted cash flow method (DCF method): both methods are used to determine the value of investment properties. In this method, the future rental income is added up and a capitalization rate is applied for a given valuation date.

• Intrinsic value method: the property’s overall value is based on the value of the land and the current value of the building on that land. The intrinsic value method does not take into account market criteria (except for land value). The intrinsic value may therefore differ from the market value. The intrinsic value method is often used for luxury properties, for example.

3. When is it worth getting an property valuation?

Professionals such as mortgage lenders and estate agents are usually well versed in estimation methods. Therefore, their estimates are often part of the normal sales process.

However, it may be worthwhile to also consult a property appraiser for the estimate, especially in the case of luxury properties, properties in need of renovation, properties with a large amount of land, highly desirable properties and historic buildings.

A written appraisal usually contains the estimated value and an assessment of the structural condition of the property.

4. What are the advantages of professional valuations?

Private sellers often assess the current market situation inaccurately. Example: having to walk 15 minutes to the nearest bus stop has become part of your everyday life. For potential buyers, this may be an argument against the purchase.

This results in price expectations that aren’t in line with the market. Setting too high a price can unnecessarily prolong the selling process. If you set your price too low, you may end up giving money away. With this in mind, it may be a good idea to consult an expert for property valuation.