How to estimate a real estate?
A real estate estimation is a key factor for both sellers and buyers. The seller uses it in order to set the price and reach the maximum level in decrease and increase negotiations. The buyer uses it in order to assess the effective business value. Nonetheless, the procedure to estimate an estate is not yet clear.
A presumed “ignorance” on the subject appears to be quite normal: a proper estimate includes various factors. The main formula is:
market value = commercial surface area multiplied by square metre quotation multiplied by quality factor
and it helps understand the criteria used; notwithstanding it proves to be insufficient in terms of the estimate itself. Here are its main features and the reasons why different other factors must be added.
Commercial surface
The commercial surface area must not be confused with the floor area. This last corresponds to the actual common spaces used in an estate, at least the floor areas. On the contrary, in calculating the commercial surface the total area occupied by the real estate must be considered. Which is the difference?
In calculating the commercial surface the following is included:
- Floor area;
- Perimetral and internal walls;
- 30% of balconies/terraces/gardens.
It is noetheless easily understandable that an estate having a commercial surface of 100 square metres can even appear to be much smaller. Only the internal and perimetral walls, as a matter of fact, occupy about 5% of the entire area.
Quotation per square metre
Once the real estate dimension calculation is done it is multiplied by the value of each square metre. This is a figure which changes from city to city, as well as from district to district. For example, a square metre value in Milan is considered higher than in the province. On the other side, a city centre square metre is considered higher than a square metre in the outskirts.
At the Tax Revenue Office a database of the square metre quotation of various cities is available. The mentioned instrument appears to be useful in order to have a general starting view idea, but it is however insufficient to provide a real estate estimate. As a matter of fact, the proper quality factors are missing.
Quality factor
Should we compare a real estate in terms of position and commercial surface would it be more valuable a ground floor or a third floor flat? And even more, is it more valuable a new ground floor flat or a third floor flat to be restored? These are two examples related to quality factors, that is to say those factors which change the estimate of a real estate.
The most important are:
- Real estate floor;
- Real estate and building conditions;
- view;
- lightness;
- heating system;
The here above mentioned can determine the value increase or decrease which is the result of the multiplication of square metres and quotations. For example, a ground floor house without garden has a 20% less value. On the contrary, a penthouse is valued up to 20% more but only if the building is provided with a lift.
Internet is not enough
The here above mentioned criteria are important as they suggest a preliminary idea of a estate real value. However, there is more than a mathematical formula to evaluate an estate. Above all, in case the final price does not often equal the obtained value.
A professional real estate advisor helps his clients in the purchase and sale at the best possible price. He looks for occasions, the estates whose value could be easily multiplied, the areas which are likely to be requalified. In other words, he goes beyond the formula and understands the real value of the business.
