Price is not the same as value!
Valuation, commercial value and sale price are not the same thing.
Only the market price, in other words, the sale price actually obtained, follows the principle of supply and demand. Estimates or valuations of the market and commercial value are theoretical values that are determined by a calculation model and they can deviate hugely from the reality. There is a buyer for each property – generally, it is only a question of price and the time that is invested in the search for the perfect buyer.
DAVE - digital bidding procedure
With DAVE, RE/MAX has a procedure that determines the price of a property fairly and transparently. As a productive tool, it allows the real estate agent to invest more time in looking for the perfect buyer.
A quick valuation is suitable for the first valuation of your property. A value for your property is established based on selected factors using complex computer models (hedonic method) that take statistical historical values into account. When using this method of valuing your property, it is important to leave a healthy amount of scope for interpretation, as only a detailed assessment of your property can come close to the market value.
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Market value estimate
A market value estimate can be determined depending on the type of property and procedure selected – various valuation methods can be used in this case. A professional market value estimate is a fixed component in the marketing process and represents a service provided by the real estate agent for a fee.
The basis here is the quick valuation, however, additional factors are considered. These factors are always recorded by RE/MAX by means of a detailed on-site inspection.
This method is usually very reliable for a detached property and apartments which are built to a moderate construction standard. However, the computer models vary depending on the provider. On the one hand, the databases differ slightly from each other, while on the other hand, different assumptions and algorithms are used. It is important to interpret each hedonic valuation with professional expertise and to compare it to one's own experiences. Most banks rely on this kind of valuation when financing detached properties and apartments.
Capitalised earnings value method
The capitalised earnings value is the value calculated by taking into account the possible projected rental income of a property when applying a capitalisation rate (achievable rental income per year divided by capitalisation rate).
Real value method
The real value corresponds to the value of the current building plus the value of the site. In this case, the present market value of the building is calculated by estimating the construction costs including additional building costs and environmental costs (restoration costs minus depreciation). The experience of the valuer must be the basis for determining the value of the site. The control value for the value of the site can be taken as the difference between the capitalised earnings value and the current value of the building.
This method builds on the capitalised earnings value method. Future cash flows are discounted to present value to determine the value of the property. This procedure is suitable for investment properties and requires special knowledge.
Values are always calculated using the subjective assumption of certain factors or estimations – actual objectivity only exists if supply and demand coincide. A comprehensive market value estimate can include all these methods, so valuation errors can be reduced.
Market value reports
Market value reports are compulsory if the value of the property needs to be determined for judicial cases. The valuation is conducted by a recognised (usually certified) expert. Market value reports are very detailed valuations and are therefore expensive. Ultimately, these qualified experts take the various valuation methods into account and determine a value rather than a price. In addition, the price is only determined in the market value report if supply and demand correspond.
The term “price” is deceptive as a price only exists if supply and demand correspond. The asking price must be fixed as part of the marketing plan and should draw the highest possible number of prospective buyers within the agreed marketing period. Using RE/MAX’s digital bidding procedure – DAVE – the fairest and best possible price for a property is determined transparently.
The principle of supply and demand also applies to property. The market price is the actual price that the buyer is ready to pay for your property.
In order for the principle of pricing to work, a potential buyer has to be found. So it’s a good idea to determine a fair price transparently with DAVE from RE/MAX.
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