Real estate appraisal is a very important process when buying or selling a condominium. An apartment appraisal can be helpful to determine the fair value of the property and make informed decisions. In this article. We’ll go through the steps of appraising a condo using the market method.
1. Collecting information
The first step in evaluating an apartment is to gather the necessary information. You should get the details of the apartment such as location, area, and Number of rooms, finishes and services available in the building. You can get this information from real estate agencies or from the owner himself.
2. Selecting Comparable Apartments
After gathering information. You should identify comparable apartments. Search for similar apartments in the same area and check the available information about them. You may need to consider several factors such as location, space, and finishes. and services to select the right comparative apartments.
3. Compare prices
After identifying comparable apartments. Compare prices. Find comparable prices for comparable apartments and compare them to the one you want to evaluate. You may need to review available property listings or contact real estate agencies for information about current prices in the market.
4. Calculating the market value
After comparing prices. You can calculate the market value of the apartment. Use comparative prices to determine the average price for similar apartments and compare it to the one you want to evaluate. You may need to consider additional factors such as the condition of the apartment and its floor in the building.
Example:
We have a residential apartment in Al Manar in Jeddah that is 8 years old and is located on the third floor and facing north on the public street with an area of 125 square meters and the area of the allocated land from the land is 38 meters and there is no dedicated driver’s room and luxurious finishing and the client wishes to evaluate it for the purpose of sale.
After studying the area of the property. We found 3 apartments that were sold in the same neighborhood with different specifications.
Apartment 1: It has an area of 130 m and is located on the first floor, with a rear facade, luxurious finishing, 5 years old, and the area of the allocated land is 42 m. It was sold a month ago for 330,000 SAR
Apartment 2: It has an area of 110 m and is located on the 5th floor and a front facade, good finishing, 7 years old, and the area of the allocated land is 33 m. It was sold two weeks ago for 310,000 SAR
Apartment 3: It has an area of 125 m and is located on the 2nd floor, front facade, luxurious finishing, 1 year old, and the area of the allocated land is 35 m. It was sold a month ago for 360 thousand SAR and contains a private driver’s room.
To evaluate the property. The apartments are compared with the comparable property and adjustments are made for differences to reach the market value like the following table:
| Characteristics of settlements | Item | Assessment property | Comparison 1 | Comparison 2 | Comparison 3 |
| Unit value | 330,000 SAR | 310,000 SAR | 360,000 SAR | ||
| Area of buildings | 125.00 m2 | 130.00 m2 | 110.00 m2 | 125.00 m2 | |
| Building Value Adjustment | 317,308 riyals | 352,273 SAR | 360,000 SAR | ||
| Type of property | Flat | apartment | apartment | apartment | |
| Property Type Adjustment | 0.0% | 0.0% | 0.0% | ||
| Type of transaction | Sale | Sale | Sale | Sale | |
| Transaction Type Reconciliation | 0.0% | 0.0% | 0.0% | ||
| Funding conditions | Criticism | Criticism | Criticism | ||
| Adjustment of financing terms | 0.0% | 0.0% | 0.0% | ||
| Terms of sale | there is no | there is no | there is no | there is no | |
| Adjusting the terms of sale | 0.0% | 0.0% | 0.0% | ||
| Market conditions | Date of assessment: | 06/01/2024 | month | Two weeks | month |
| Normalize market conditions | 0.0% | 0.0% | 0.0% | ||
| Area of buildings | 125.00 m2 | 130.00 m2 | 110.00 m2 | 125.00 m2 | |
| Square footage normalization | 5.0% | 0.2% | -0.7% | 0.0% | |
| Floor | 3 | 1 | 5 | 2 | |
| Leveling the floor | 3.0% | -3.0% | 1.0% | ||
| Location of the property from the building | Forward | Background | Forward | Forward | |
| Normalize the location of the property from the building | 5.0% | 0.0% | 0.0% | ||
| Facade of the building | Northern | Southern | Northern | Eastern | |
| Architectural Facade Settlements | 3.0% | 0.0% | 2.0% | ||
| Finishing level | Luxurious | Luxurious | Good | Luxurious | |
| Finishing Level Adjustments | 0.0% | 10.0% | 0.0% | ||
| Age of the property | 8 | 5 | 7 | 1 | |
| Property Age Adjustment | -5.0% | -1.0% | -15.0% | ||
| Availability of private parking | Yes | Yes | Yes | Yes | |
| Private parking availability adjustment | 0.0% | 0.0% | 0.0% | ||
| Availability of a driver’s room | No | No | No | Yes | |
| Driver Room Availability Settlement | 0.0% | 0.0% | -10.0% | ||
| Private deck/balcony availability | No | No | No | No | |
| Private Deck/Balcony Settlement | 0.0% | 0.0% | 0.0% | ||
| Property Area (Neighborhood) | Almanar | Lighthouse | Lighthouse | Lighthouse | |
| Property Area (Neighborhood) Leveling | 0.0% | 0.0% | 0.0% | ||
| General location features | there is no | 0 | 0 | 0 | |
| Property Features Adjustment | 0.0% | 0.0% | 0.0% | ||
| Other | there is no | 0 | 0 | 0 | |
| Another compromise | 0.0% | 0.0% | 0.0% | ||
| Property value after adjusting for property characteristics | 336,436 SAR | 369,579 SAR | 283,717 SAR | ||
| Weighting ratios | 33.0% | 33.0% | 34.0% | ||
| The value of the property after weighting: | 329,449 SAR |
Value of the appraised property after weighting = SAR 329448
Comparative condo valuation using the market method can be a powerful tool for making informed decisions in real estate. Following these steps will help you properly appraise the apartment and determine the fair value of the property.
