It’s most likely that you have heard the term “property valuation” tossed around quite a bit if you’re a real estate investor. But what exactly is a property valuation? And why is it so important?
Property Valuation: A Quick Glance
A property valuation is basically an estimate of a property’s worth. This value is calculated based on many different factors, including the property’s location, size, amenities, and recent sales data.
For instance, you’re thinking about buying a duplex in your city’s up-and-coming neighborhood. You could research recent sales data for similar properties in the area to understand what that particular duplex is worth.
Many investors are keen if appraisers are honest and reliable. The vast majority of professional appraisers are trustworthy. However, there have been cases of appraisers inflating property values to help sellers or buyers. If you’re concerned about this, you can ask for a second opinion from another appraiser or surveyor, such as these surveyors London professionals.
What Is Property Valuation for Probate?
Probate is a legal process of distributing a deceased person’s assets. In the UK, if someone dies without a will, their assets will go through probate court. Part of this process is valuing the deceased person’s assets so that they can be distributed fairly.
In a commercial property valuation, for instance. Commercial property valuation for probate is performed by a professional appraiser and considers the property’s location, size, condition, and recent sales data.
Property Valuation for Capital Gains Tax (CGT)
When you sell a property, you may have to pay capital gains tax. This tax is based on the difference between the sale price and the property’s original purchase price. You owe capital gains tax on the profit if the property has increased value.
Property valuation for CGT purposes is different from a standard appraisal. The appraiser will focus on the property’s value at the time of sale rather than its current market value. They will also consider any improvements you’ve made to the property since you purchased it.
This is important because it can help you minimize your tax bill. If you make significant improvements to a property, you may be able to lower your capital gains tax liability.
Let’s say you bought a property for $100,000, and it’s now worth $150,000. You decide to sell it and use a professional appraiser to get a valuation. The appraiser determines that the property is only worth $140,000. This means your capital gain is $40,000, and you will owe capital gains tax on this amount.
Importance of a Property Valuation to Investors
As a real estate investor, it’s essential to understand your property’s value. This will help you make sound investment decisions and maximize your profits. Here are the benefits of a property valuation:
1. It can help you determine whether a property is overpriced or underpriced.
If you plan on selling a property, a valuation can give you an idea of how much it’s worth. This information can help you price your property correctly and avoid leaving money on the table.
2. It can help you negotiate better deals with sellers, buyers, and lenders.
If you know the true value of a property, you’ll be in a better position to negotiate deals. For example, you may get a lower purchase price if you know the seller is overvaluing their property.
Also, if there’s a dispute over the value of a property, a valuation can help resolve the issue. There are companies providing an expert witness surveyor who can give an accurate property valuation to back up your claim in court.
3. It helps you get better terms on loans.
If you’re planning to finance a property purchase with a loan, the lender will require a valuation. They need to know the value of the property so they can determine how much money to lend you.
Lenders typically use their own appraisers to assess the value of a property. However, you can also order your valuation. This may be beneficial if you think the lender’s appraiser is undervaluing the property. Your valuation can help you get a higher loan amount or better terms.
If you’re looking for a loan to buy an investment property, the lender will require a property valuation. It’s because the lender wants to be sure that the property is worth at least as much as the loan amount. If the property’s value is less than the loan amount, the lender may refuse to give you the loan.
A property valuation can also be used to get a home equity loan. This type of loan allows you to borrow money against the equity in your home. The money you can borrow depends on the value of your home.
If you think your home is worth more than what the lender says, you can order a property valuation to prove it. This may help you get a higher loan amount or better loan terms.