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How Online Property Valuation Tools Work 

24th February 2020

When buying property, buyers need to know the type of house they can get with their budget. Similarly, investors need to know the most lucrative kind of properties before committing their money. Property valuation helps clear their minds and decide on the type of real estate to buy, rent, or develop.

Real estate valuation tools are also useful to agents because they help them appraise the properties under their management and charge prices that are consistent with the market rates. There three main methods of property valuation.

Cost replacement methods

Cost replacement methods value properties by estimating the amount of money it would take to develop a similar project. To appraise a property, buyers or property managers use the current cost of land, construction materials, labour, and support infrastructure to derive a value. 

Comparative methods

Comparative methods use historical sales data to determine the price of different types of real estate. Typically, the users of such methods have a database of many properties in a particular area that includes their past and present valuation. 


They classify the properties into different categories such that users can get an estimate by entering the characteristics of a specific type of real estate. To value a property, users enter the details such as location, age, amenities, and design and get an estimate from the comparator. 

Income capitalization

Income capitalization is a method that values property based on the amount of income the owner can make in a definite period, such as a month or year. Appraisers may rely on estimates of rental income from similar properties in the same location or have similar characteristics. 

Online House Valuation Tools

Online property valuation tools are calculators that some websites provide to help agents and buyers estimate the value of different types of properties. Several evaluation tools are accessible on the internet though they may differ on the methodology and relevance to different users. Most calculators derive their data from land registry records and other reputable sources of information in the real estate sector. 


Even though most of them are free, they may only apply to certain types of properties or real estate in a particular region or country. Indeed, some tools only work in American or European property markets. There are also differences in the accuracy and reliability of different calculators. Users should look out for these subtle differences when searching for an evaluation calculator. 

Factors Used By Calculators to Value Properties Location

Property value varies with the area such that real estate in upmarket regions is more valuable than those in the hinterland of a city or suburb. Similarly, properties in some neighbourhoods may be more expensive than others due to the differences in income levels, cleanliness, and crime record. Moreover, properties in remote areas are likely to be cheap due to the poor state of infrastructure.

Property characteristics

Recent developments real estate are likely to command higher prices than those that are decades old and needing frequent renovations. Similarly, apartments with exquisite designs, ample space, and other attractive features may attract better prices than drab rental houses. 

Infrastructure and amenities

Properties located near critical infrastructures such as schools, major roads and shopping malls are likely to be more valuable than those in the hinterland. This is especially true for commercial properties where a strategic location may cause a property to command premium prices. 

Using a House Valuation Tool

Once the user has identified a suitable tool, they will need to enter personal and property-specific information such as location, size, amenities, and age. The calculator has an algorithm that uses property characteristics and area-specific data to come up with a figure.
Some tools offer immediate results while others send them to the users’ email address. Users should also note that the valuation they get is just an estimate as the house may be 10-50% cheaper or costlier than the value indicated by the online calculator. 

Conclusion

Online house valuation tools are valuable to owners and buyers of real estate as they provide a rough estimate of the value of properties in different areas. They arm them with critical information that they can use during negotiations. However, users should make sure that the tools they use are credible and reliable to get an estimate that reflects the reality on the ground.

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