If you plan on selling your home or building, you must wonder, “How to find the property value?” The best approach is to ask a real estate professional. However, it doesn’t hurt to know how it works in the real estate world.

Why Is Property Value Important?

Estimating a property’s value is helpful for making an offer on a building or land you want to buy. Knowing your own property’s value is useful for setting a listing price and calculating how much money you will get when you sell.

But finding its value is important for more than just buying or selling. It also affects refinances, home equity lines of credit, and annual property taxes. Knowing your property’s worth gives you more control over these things.

For instance, if you think your property tax assessment is too high, you can appeal to your local assessor’s office and potentially lower your tax bill by providing evidence to support your case.

Calculation of a Property’s Market Value

The property value of real estate, like a commercial building or office space, is the estimated price it can sell for in the open market. This market value is mainly determined by current supply and demand:

  • Market Demand: The interest from potential buyers or investors looking to purchase real estate in a specific area.
  • Market Supply: The amount of real estate, such as properties or land, available for sale.

If the supply stays the same but demand increases, property values are likely to go up, assuming everything else remains constant. Property values constantly change based on the balance between supply and demand, as well as other factors like interest rates (the cost of borrowing money).

What Factors Affect a Property’s Value?

The factors that impact your property’s value in the real estate market include:

  • Market Conditions (Supply-Demand)
    The main factor affecting real estate property values is market demand. If demand increases, property values tend to rise. Conversely, if demand decreases, property values usually fall.
  • Inflation
    Inflation occurs when the prices of goods and services rise due to too much money in circulation, which devalues the currency and reduces purchasing power. During inflation, the real estate market often slows down due to fears of a potential recession and higher costs for construction supplies. Historically, new construction activity drops during recessions and home loan defaults increase.
  • Interest Rate Environment
    Current interest rates and the availability of low-cost debt financing impact real estate market activity. Higher borrowing costs reduce home purchase demand, as fewer people can afford to buy homes. Conversely, lower interest rates encourage more home purchases as loans become cheaper and more accessible.
  • Location and Proximity
    Properties in densely populated cities, such as New York City, Boston, Los Angeles, and Miami, often have higher values due to strong market demand. Proximity to schools, workplaces, transportation, and amenities can also increase property values. For example, properties near the NYC Transit system command higher prices due to the convenience of nearby public transportation.
  • Safety and Security (Crime Rate)
    Safety is a priority for many buyers, especially families. Properties in safer neighborhoods often highlight low crime rates and safety measures, such as security alarms and gated communities, to attract buyers and increase demand.
  • Design and Layout
    Properties designed for a specific demographic can have higher prices due to their unique layouts. Limited supply and high demand for these niche properties result in higher valuations because buyers are willing to pay more for rarity.
  • Current Condition of Property
    The condition of a property affects its value. Buyers might negotiate a lower price if the property needs repairs. Outdated features, like an old A/C system, can decrease demand and reduce the sale price.
  • Sales Comparison
    The sale prices of similar properties in the same or nearby areas provide useful pricing insights. Buyers and sellers often use past transactions to negotiate the property’s value.

Closing Note

Still struggling about “How to find the property value?” It can be hard to get an accurate estimate. A real estate professional can help. However, knowing the details mentioned earlier can help you get the closest estimate yourself.

Contact us at Red Door Funding for more details and information. Call us at (832) 539-1099 to reach out.

Skip to content