selling a house

Significance of property valuation

Utility and scarcity have a major influence in determining the valuation of a property. On one hand, the utility is the ability to satisfy a desire or need whereas scarcity refers to the finite supply of the properties.

It is not essential merely in a real-estate sense but is beneficial for the owner in multiple ways.

  • Buying and selling- No law makes it mandatory to get the property evaluated before trading in it. It is more of a precautionary measure. If you are a seller, you would want to do your homework before selling your property to derive the maximum benefit out of it. Similarly, if you are a buyer, you would not want the other party to outsmart you and charge you a price higher than what is the actual worth.

We all love our hard earn money, don’t we?

  • Mortgage purposes- Almost every financial institution, be it a bank or a private institution, requires the valuation report before granting any type of loan to anybody. The loan is generally provided against the property only, and it acts as a guarantee.
  • Taxation purposes- The tax laws of a lot of countries make it mandatory for the taxpayer to get the property valued correctly because various types of taxes are calculated based on valuation only. Also, it is essential for legal tax saving and planning.
  • Insurance- It is a mandatory condition put forward by many institutions as the first step to grant insurance.
  • Stamp duty- Legal transfer of a property makes the payment of stamp duty obligatory. It is calculated based on the value of the property, or as a percentage of the same.
  • Charging rent- The valuation becomes of utmost importance while deciding the rent to be charged, be it for something as small as a house or something as huge as a whole business.
  • Other purposes such as bank guarantees, auctioning, to calculate depreciation, acquisition by the authorities, preparing will, testament, division of property, partition, etc.
  • In the case of intellectual property, its valuation is essential from the perspective of selling, licensing, franchising, tax optimization, investing in further research and development, etc.

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