how to know if property prices are overvalued or fairly valued or undervalued ?

November 28th, 2009 | by admin |

i want to know how do we evaluate home prices and know wether they are fairly valued or undervalued or overvalued ?? is there tools to determine so or not ?? if yes please tell me

thank you

There are several methods that appraisers use. The most common is comparable sales. That determines the value of land by looking at similar homes that have actually sold recently. If you are looking for a more objective standard, you can look to replacement cost. Replacement cost values the land and then determines what it would cost to build the same improvements on that land. This can give you a good idea as to whether or not prices are "overvalued" because if you could build a new home on similar land for much less, then the market may be inflating the price. Of course, the location of the land is very important and there are many areas where you obviously cannot build a new house.

As you can see it is not an exact science. To some extent it takes a leap of faith. That is why consumer confidence is so important in the housing market. When you see that people are scared that prices will continue to drop, they do not purchase and it is a self fulfilling prophecy to some extent.

  1. 3 Responses to “how to know if property prices are overvalued or fairly valued or undervalued ?”

  2. By Ken on Nov 29, 2009 | Reply

    There are several methods that appraisers use. The most common is comparable sales. That determines the value of land by looking at similar homes that have actually sold recently. If you are looking for a more objective standard, you can look to replacement cost. Replacement cost values the land and then determines what it would cost to build the same improvements on that land. This can give you a good idea as to whether or not prices are "overvalued" because if you could build a new home on similar land for much less, then the market may be inflating the price. Of course, the location of the land is very important and there are many areas where you obviously cannot build a new house.

    As you can see it is not an exact science. To some extent it takes a leap of faith. That is why consumer confidence is so important in the housing market. When you see that people are scared that prices will continue to drop, they do not purchase and it is a self fulfilling prophecy to some extent.
    References :

  3. By stevethespiffy on Nov 29, 2009 | Reply

    Zillow.com can give you a basic idea. Your best bet is to talk to several local Realtors and ask them their opinion on the price of your home. Most will happily do a CMA (competitive market analysis) free in hopes of getting the listing in the future.

    Steve
    References :

  4. By Anthony S on Nov 29, 2009 | Reply

    you need to talk to a pro who works the areas you want to know about. A desk top number generated by zillow or bank of america, realtor.com are okay, but are nothing as good as a pro.

    Professionals often get a list once a week or month of homes sold in the area they work. They are in and out about the areas talking to locals and going to zoning boards meetings.

    They know if price will fall and rise before they happen.
    References :

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