How to estimate a property value?

There are several reasons to value your property, the most common case is when an owner wants to sell his property, or a potential buyer wants to make an offer, to purchase it.

It is necessary for the owner to define a fair price, in conformity with the market value, so as not to discourage some people or extend the selling period. All the more so because if the price is too high, the buyer will try to negotiate a price much lower than its real value and the seller risks giving in if he is in an emergency situation or if he hasn't had any other offers for some time.

What is the real property value?

When we try to calculate the real value of a property, we encounter several notions of price:

• Selling price/asking price: The amount at which the seller is willing to sell his house.
  
  
• Offered price: Amount that the buyer is willing to offer, based on his own estimate of the value of the property and his financial capacity.
  
  
• Transaction price: The price that the seller and buyer agree to after negotiations.
  
  
• Fair price: Optimal price that will allow the seller to make a sale within a realistic timeframe, without underestimating the real value of the property.
  
  
  

What are the different methods for valuing a property?

1. Online estimation

2. Comparative market analysis

3. Calculation according to the price per m² in his city

4. Estimation by a professional on-site

Online estimation (the hedonistic method)

The hedonic method is used by online valuation tools to estimate a property. In Switzerland, banks and insurance companies also use this method to determine the maximum amount they are prepared to finance. It consists of comparing the property in question with similar houses currently on the market or sold in recent months.

To make your online evaluation, simply fill in the specific characteristics of your property:

• the mailing address
• the living area 
• the surface of the land
• the year of construction
• the number of rooms (bedrooms and bathrooms)
• the possible arrangements (swimming pool, terrace, veranda, garden with an open view)

The estimation tool will also take into account many location-related parameters:

• proximity to transport, shops, schools, etc.
• a possible construction project in the street or in the city
• the number of similar offers in the vicinity

Once these elements have been filled in, the tool compares your property to all those in its database that meet similar criteria and will provide you with a price range.

This method is very reliable for standard goods because the more observations of similar goods, the more precise the statistical regressions are.

Comparative market analysis

The comparative market analysis consists of manually comparing properties similar to yours, sold or for sale in your town, in order to compare the selling prices offered by the owners and to define the price that is closest to your property.

You can very easily on an online ad site, filter houses in your city by selecting features similar to your house and find out the selling prices they have estimated.

Let's say your house has the following characteristics:

• built-in 1990
• with a living area of 190 m².
• a plot of land of 500 sqm
• with 6 pieces

Above are the houses sorted in descending order by price per m².
The offline mention means that it has been taken off the market, so it has either been sold or the owner did not want to sell it in the end.

Having selected these filters, the houses that appear in the result display selling prices between CHF 1,790,000 and CHF 2,850,000.

The two amounts are quite far apart despite their close location, which is explained by their very distinct characteristics.

1. The first house at the price of CHF 2'850'000 has been recently renovated and has the largest plot of land among the selection.

2. The second house has a view of the lake, which is a very popular feature.

3. The third has a swimming pool and a plot of land that is larger or smaller than the following ones.

4. The fourth has also been renovated in the years before being put up for sale.

5. Ads 5 and 6 are in good condition, but a smaller plot of land.

6. Finally, the last two show unfavourable characteristics such as a non-optimal location and a poor technical diagnosis, which may be an energy-intensive dwelling or a poor gas or electricity installation for example.

If your house has not been recently renovated, does not have a nice view, a very large plot, or a swimming pool, you can assume that your price per m² is below the first 4 results.

We can deduce that the sample house is close to properties 5 and 6, it could even be worth more knowing that its land is larger. We will, therefore, position ourselves for the property in question, in a range between CHF 11'581.00 / m² and CHF 11'351.00 / m².

It should be noted that the time of sale of a property is also an indicator to be taken into account. If the house has already been online for one year, it is possible that the property is overestimated.

Calculation according to the price per m² in his city

In order to calculate the price of your property, you first need to find a reliable source that indicates the price per median square meter in your city. RealAdvisor provides you with this precise information on its website, find all the prices per square meter in each city and municipality in Switzerland.

• If the average price per square metre for a house at 1010 Lausanne is CHF 12'994.
• And your surface area of 190 sqm, you will have to multiply the price per square metre by the surface area of your property, as follows:
  
  190 m² x CHF 12'994 = CHF 2'468'860.00.

This method will allow you to have a more or less exact evaluation, but will not take into account the specific characteristics of your property. Nevertheless, it is still widely used by buyers, who use the price per m² to evaluate a property quickly and to determine whether the asking price is not overestimated.

Estimation by a professional on-site

The real estate professional is often asked to refine the price of the property. This can be a notary, a real estate agent or a broker. The latter analyses the subjective aspects of the property of which the owners are not always aware and also has knowledge of the local market, which will help him to anticipate the impact of the environment on the price of the property. During a visit, he will inform you about the specific characteristics of the property and in order to provide you with a complete value opinion, he will ask you for certain documents:

NB: 🏢 Documents required for flats - more information about the valuation of a flat

- 🏠 Required documents for houses - more information on the estimation of a house

• 🏠 🏢 The extract from the land register
• 🏠 🏢 The tax value: It appears in the appendix "Real estate tax notice" of your last slip.
• 🏠 Servitudes: Servitudes, if existing, are the real rights in real property that pass from owner to owner.
• 🏠 Private law conventions: Conventions are the provisions in the contract of sale relating to the right to build, agreements with neighbours, etc.
• 🏠 Safety certificate for low-voltage electrical installation: If there is no safety certificate, it must be issued by an electrical installer with a licence.
• 🏠 🏢 A description of the construction
• 🏠 Cadastral map: Ask the Land Registry Surveyor
• 🏠 Building fire insurance policy: Ask the insurance company for the policy
• 🏠 🏢 Building plans: These include the floor plan, sectional plan and facades.
  
  

In the case of a co-ownership:

• 🏢 The last three minutes of the General Assembly of PPE
• 🏢 Amount of the renovation fund
• 🏢 Complete EPP booklet
• 🏢 Rules of administration and use
• 🏢 Incidental expenses statement

Other documents :

• 🏠 🏢 An old appraisal
• 🏠 🏢 Deed of purchase
• 🏠 🏢 Financing information (mortgage and bank)
• 🏠 Cadastre of former land charges: To be requested from the Canton
  

All these documents are of course not obligatory, but allow the real estate expert to make the most accurate valuation possible.

What are the main factors that can influence the price of a property?

It is important to know that the value of a built property only depreciates over the years, unlike land, which generally increases in value. In order to enhance the value of a property, it is important to highlight all its assets and possibly renovate rooms that seem old. If the cost of the work is under control, these efforts will be much more profitable than selling the property as it is.

Landlords have an emotional relationship with the home in which they have lived for years, so some things they have invested in may not have the same value in the eyes of someone else.

The things that really add value to a property are :

The location 

• The city's tax rate
• A view of the sea, a mountain, or a monument
• Proximity to transport, with bus stops, a train station or an airport 
• A new project in the region to improve roads and public spaces
• A south-east or south-west orientation

A building reserve

• When there is a possibility of enlarging the dwelling for the buyer
• When the land has a higher value than the house, because there is a possibility of construction, the seller can get a better price from a real estate developer.

A recent renovation:

• Like repainting the walls and ceilings, changing the carpeting.
• Redo the kitchen with more modern equipment 
• Replace the boiler or heating system with a more economical and environmentally friendly system.

Convertible areas in addition to the living area:

• A balcony, a veranda, a terrace, a large garden 
• Indoor or outdoor parking spaces
• A cellar or an attic that can be converted
  

Offer and demand:

• The fewer properties for sale in the area and the greater the demand, the more valuable your property will be.

Conversely, the elements that drive down the price of real estate are :

A deteriorated, not renovated property:

• If the purchaser must carry out work, he can negotiate a deduction for additional costs related to the repairs.
• If the work is to be paid for by the seller, the buyer may demand a surcharge if the delivery or renovation deadlines are delayed.

A bad technical diagnosis:

• Energy-intensive housing
• High Greenhouse Gas Emissions
• The presence of asbestos, termites...
• A risk of lead explosion
• The state of the gas and electricity system

The location:

• Noise, such as frequent air traffic
• A construction in front of the property which obstructs the view or blocks access to a road
• A ground floor dwelling, as opposed to an upper floor, is less popular.

What estimation methods should be used?

In order to facilitate and speed up the transaction, it is essential not to make a mistake on the definition of the selling price. 
To do this, it is advisable to keep a complete watch:

1. By simulating several estimates online and calculating the price per square meter of your property.

2. By comparing the prices obtained with similar transactions or offers for sale in your town.

3. Finally, in order not to forget any element that could impact the selling price, you can contact a professional expert to adjust this estimate.

The analysis of the market and the results obtained through the online evaluation tools will allow you to understand the price estimated by the expert.

Many people find that calling in an expert is not a very profitable effort, but their advice can be invaluable in adding value to the property and speeding up the selling process. Especially since these services are not necessarily paid for, many offer this service free of charge and without obligation, their only remuneration will be a commission on the sale of the property, if you decide to use their services to sell your property.