![]() ![]() But the less transaction activities you have in your market, the less useful this method is. This approach works well when you have had a lot of transaction activity in your market within the last 12 months. So, data such as differences in sale date, geographic location, building age, square footage, and proximity to other landmarks are used to calculate an appropriate value. This method uses comparable sales data from similar properties that have been sold recently, and are similar in age, location, and overall property quality. Generally, it is difficult to use this method on anything other than a new structure. This appraisal method also factors in the useful economic life of the building, and the time that elapsed since the property was placed into service. Construction costs and market land value are factored in, but reduced by physical deterioration, structural and functional obsolescence, or by any external factors from the surrounding area such as extreme traffic, pollution, or anything else that would affect the operating income of the property. In case of an existing property, however, appraisal becomes more complicated. If your investment property is a new building, valuation might be simpler as it generally involves the construction cost and the market value of the land. The value of a residential property is determined largely by its condition, but the value of a commercial property is determined by several other factors such as location, its potential to generate a rental income, floor plan and amenities. To make sure that you are provided with an accurate figure, the surveyor you have retained has to opt for the right valuation method. These valuation methods are different to the method an estate agent would use to calculate the market value of a real estate. The three main approaches are the cost approach, the income approach, and the sales comparison approach. There are different commercial property valuation methods that can be implemented to determine the current market value of a commercial real estate.
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