Building Valuation: Important, Purposes of Building Valuation

The computing method of the price or economic cost of a building at the current time is known as the building valuation. During selling or buying a building you need to understand the actual value of the item you are buying.

For buildings, a similar thought is considered. Before one buys a building or sells a building he should calculate the present value of the property. And this analysis process should be accomplished accurately. Numerous people make common errors while calculating the value of a building or the worth of a building.

The value or price of everything varies with time. With fluctuating inflation and deflation the price of everything in the market differs. This is involved in both movable and immovable possessions. As we all know that building is an immovable property.

That means you can not transfer the property. This is the reason the same buildings in various areas price differently.

For example, a house in a city will price much more than a house in the countryside or the village area.

The cause for this difference is the availability of other necessary items for living such as healthcare and other things. So the worth of a building is responsible, unlike numerous other things. The price or value of a building relies on some essential elements that must be considered essential while considering the value of the building.

Some of these items are the type of material and the quality of used materials like cement, concrete, and rods, in making the building. The area plays an important role in evaluating the value of a building. And other factors like the type of building, its size of it, the building’s structure, and its shape must be evaluated while evaluating a building.

The height as well as the breadth of the building, thickness of the roofs and walls, height of roofs, floors, and flooring influence the price of a house. The nature of a building similarly impacts the valuation method. Additional natures of buildings price differently.

For example, frame structure buildings will price differently than that load-bearing buildings.

The valuation of a building also relies on demand. The demand for buying a building changes relying on many factors from time to time, from area to area. The better the demand, the more the value of the building.

  1. What Is Building Valuation?  

Building valuation may be defined as a process that preserves you from suffering a serious loss when you sell your building or when you buy a building. Constructing a house carries a lot of time as well as cash.

So when you suffer a loss while selling the building you not only lose your hard-earned cash but also your important time. The process of building valuation preserves you from completing these errors and saving both. One of the considerably essential elements of calculating the price of a building is its spot.

Location is the most significant element. Altering the location of the building changes its importance of the building. The exact building if placed in other areas prices differently.

That’s the reason beautiful and big well-made buildings in the countryside cost less than tiny little buildings in a city. Furthermore, the healthcare system, water supply, sewer, availability of malls, and transport systems improve the worth of any property.

Buildings that are made on freehold lands are more valuable and costlier than buildings that are built on leasehold land. The age of a building is also an important element that impacts the price of a building. The older a building conveys the more its worth depreciates. The price of a building is significantly influenced by its age.

So while considering the price or in other words while considering the building, age must be known. If the same age is not known of a building then professionals must be hired to check the building and the possible age of the building. It is also essential for safety and security. If a building is too aged to be lived in then the building should not be purchased.

Estimating the current cost of a building must look at some other issues as well. Before calculating the worth of the building the records should be inspected. The bills and costs will help you in considering the cost of a building.

Depreciation is also a significant element and while the valuation of the building this element must not be neglected. The importance of a building declines every year. There is a rate of depreciation of building every year. The rate is called the depreciation rate.

The depreciation rate is varying from area to area and not only that but also with the increasing age of the building the rate of depreciation increases. For instance, if a building is 5 years aged then the depreciation rate is 0.5% per year. But if the building becomes more senior than 10 years then the depreciation rate is raised to 0.75% per year. This price can vary from area to area.

  2. Purposes of Building Valuation  

The purposes of building valuation are listed below:

a. Both for Purchasing and Selling a Building

It is important to understand the value of a building in both the cases of purchasing a building and selling building. Without a suitable valuation of the building, it is foolish to move with the process. This can direct to huge losses.

When someone purchases a building he or she places his hard-earned money on his. So suffering a loss will be painful. So it is needed that the valuation method of the building must be accomplished before selling or purchasing. The valuation of the building must be accomplished by a professional.

b. Taxation

The charge of tax to be spent on a house or building is set by accomplishing the valuation of the building. Different taxes we must pay every year. There is a base of taxation on each item. Taxes like municipality tax, property tax, and health tax all are established on the result of the valuation of the building.

For buildings with other monetary valuations, the taxes will also be different. So making the perfect assessment of the amount of payable taxes on property tax, or various other taxes is accomplished based on valuation.

c. Assessment of the Amount of Payable Rent

If you live in a rented house you must know whether the rent you are paying monthly for living in the building is weather-fair or not. Many people pay rent without knowing the value of the house they are living in this suffering severe loss.

Also in the subject of providing your building to rent, you must understand the worth of your building to select the charge of payable rent. The rent should be a particular percentage of the total worth of the building. Usually, the payable rent yearly is 10% to 6% of the present worth of the building.

d. Loan Security before taking a Loan or Mortgage

A mortgage is the security of a loan that is accomplished and established on the valuation of a building. Before providing a loan the banks take a mortgage. In point the person is incapable to pay the debt, the property is taken by the bank, and the loan charge is recovered.

So before providing a loan to someone it is advisable to do the same valuation of the property he is ready to keep as a mortgage. In matters of buildings, the charge of the loan should not surpass the worth or value of the building.

e. Compulsory Acquisition

There are numerous incidents when a property or building is acquitted by the government. There can be multiple reasons behind these acquisitions. For conducting different projects, constructing roads, power greed, construction of new rail lines, etc. Properties are acquitted. In such cases compensation is paid to the owner of the property. At the point of acquiring a building, the owner is to be paid some compensation.

The worth of this competition to be paid should be based on the worth of the property. So for acquisition, it is essential to understand the worth of the building throw building valuation.

f. Salvage value

Salvage value is the estimated worth of a property that is aged and not valuable anymore. To choose the price of the property or building that will be depreciated, the cost of the property salvage value is deducted. In other words, you can say, it is the resale value.

g. Scrap value

Scrap signifies ruins or debris. The importance of disassembled materials is known as scrap value. After the life of the building when it is disassembled the cost of scraps like rods, timbers, bricks, etc will procure some money. This charge is called scrap value.

These were the few things that you must know at the time of building valuation.