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What’s the major difference between these two – Residential Property Valuation & Commercial Property Valuation

Buying, selling, investing these are the terms highly associated with real estate property market. It is a kind of part and parcel for real estate. And these transactions won’t be possible without the property valuation services. Though people go to the real estate agents for market appraisal whereas appraisal value is the not considered as authentic and reliable one. The property valuation by authentic property valuer is the right way to know the property value as the valuers are the qualified professionals who possess the deep market knowledge. As their analytical, and observational skills help them to calculate the accurate market value of the property.

The properties are widely categorized into two – residential property and commercial property. Although every property is unique in its own, either by design, structure, council zoning, area, location and, many more factors are there which contributes to making them unique. The advantages and purpose of both the type of properties are different too.

First, we will initiate with the residential property –
The residential property is used for the dwelling or living purpose of a single, joint or multiple families. The residential property includes – houses, penthouses, condominium, townhouses.
This kind of property can be purchased either for investment purpose or for self-use. The buying a residential property develops the need of the property valuation which helps the buyer and seller to know the actual market value of the property. Whereas the selling price may or may not be equal to the property value that is estimated by the home valuer. Because the selling price or property price depends upon the buyer and seller agreement and mutual understanding.

The best method for residential property valuation is Sales Comparison Method –
Finding the comparable of the residential property is quite easy. Comparable is the similar type of property which is located near the subject property and sold out in the last six months. So the selling price of the comparable can help to evaluate the value of the residential subject property.

For example – The selling price of comparable is $ 1,00,000 with three bedrooms, 4 toilets, and a garden. Whereas the subject property is identical to comparable in every aspect like – size, location, and zoning. So the value of the subject property is also $1,00,000.

Hence it is quite easy to evaluate the value of the residential property. Because of comparables, sales comparison can be made effortlessly. In the case when comparables are not available then the house valuer has to inspect, observe, analyse, calculate and estimate the value of the property.

The commercial property –
The property which generates the income, which is used for the commercial purposes comes under the commercial property. Like shops, offices, buildings, warehouses, retail stores. These properties are used for doing businesses, making money so the price or value of this property is higher than the residential one. The value of the commercial property is evaluated by income. As by and large of the commercial buildings is owned by the real estate investors who usually keeps the property on a rental basis. The net operating income of the property which is calculated by gross income deducted by the operating expenses. Thus the Net income divided by the capital rate will give the property value.

This is a quite calculative way to evaluate the value of the property. The residential properties and commercial properties are different on its own and thus their valuation methods differ.

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