Everyone in his/her life at some point evaluates their assets or real estate property and this value includes evaluation of market value and fair value.
When it comes to real estate, Property Valuation needs a deep study and understanding about the subject with latest amendments, rules, acts, guidelines and notifications.
Market value for properties in Mumbai has always been high and is still on the verge of increment as the developments are taking on a fast pace with the new inventions and technologies. Another reason for the hike in the market value is because the land parcels available in Mumbai are very less.
Both concepts of Market Value and Fair Value are discussed below that will give you a deep knowledge about the market value, fair value and its difference.
Market Value
Market value in easy terms is defined as at what rate a property can be sold under normal conditions without any compulsion to buy or sell a property. Market value is basically an educated guess, but it can be fairly accurate if you apply the right method and consider all the important details. And it is not exactly a science rather it is a business tool introduced by companies and individuals.
The purpose behind why a person should calculate market value is, because when you estimate the market value of your home, you get good idea on the property taxes that can be levied and a fair knowledge if you considering to refinance your home.
Market Value of a property is mainly determined by examining the buyer’s capability to pay and seller’s price expectation for the property. It is a value range estimated by concentrating on the recent and actual sale prices of the location. This estimation gives a good indication of what are the demands of seller and how much a buyer can pay.
So it is clear that market value depends on the demand and supply factor, therefore any location which has high demand but low supply when compared to other locations, it will charge higher prices for properties than the properties in the location with which it is compared.
Being the most expensive city with modern lifestyles people are highly attracted towards Mumbai which is leading to more and more demand for residencies and hence, with the above concept of demand and supply for market value, the market value of properties in Mumbai are increasing day by day.
Fair value:
Fair Value is a hunt for a price to sell a property or buy a property considering the profit gain of each participant.
Difference between market value and fair value:
Market Value and Fair Value, both are the significant terms in property valuation context and their definitions mentioned above sounds identical. Therefore, people think they can be interchangeable, but this is a misunderstanding, both the terms highly differ in their origins and hence in their applications also.
Market value was developed in context of tax compliance and it is applied for all state tax and federal matters and also includes estate taxes which are not in case of Fair value. Therefore, the appraisers and the accountants highly rely on Market value as a standard value for their assets and real estate.
Whereas, Fair value is the valuation standard which follows GAAP (Generally Accepted Accounting Principles), which is an official team for processing rules that are led out by FASB (Financial Accounting Standards Board) who further gets the authority from (SEC) Securities Exchange Commission. Therefore, fair values are measured in the context of financial reporting.
The difference between both the terms goes beyond the origin and includes input parameter also. Market value sticks to an objective of what totally aware, fictional and willing buyers and sellers accept to pay for something. Fair value focuses on to convey that both buyer and seller take into account the advantages and disadvantages of the deal that each one of them will gain.
Market value proceeds towards property valuation in a more theoretical way whereas, fair value approaches to the aspects of the participating parties.
Actually, there is a race between fair value and market value. And being the fact that market value started first, fair value is coming up as it is driven by Globalization.
Let’s look out on the factors that affect the market value of a property.
Location:rnLocation is an important parameter in property valuation sector. Location that has good neighborhood, renowned schools and colleges and various other social and physical infrastructures highly impact and take up the market value of a property.
Supply and Demand:rnThis factor indicates the number of sale versus the number of buyers i.e. if the location at which you reside has huge no of property for sale with less demand than the market value of such properties is low and vice a versa.
External features:rnExternal features include the surroundings of the home i.e. roads, sidewalks, sewage and water systems etc. the properties with good external features have good market value.
Internal Features:rnInternal features of a property positively contribute to its market value if it has good construction quality, more number of rooms, high size or area of the property etc.
Comparing the property:
You will not get the exact comparison for your property, but adjusting the prices and analyzing few points, you can estimate at what price the property would have been sold if it had the characteristics matching to the comparable property.
One can compare his/her sold property to check whether it was sold at right price or not, based on the factors like location, area and how old the property is?
Following are the helpers that can provide you the comparable properties for your home.
Real Estate Consultants:
As they are the experts they know well about the real estate market values and fair values and are highly experienced. So, you can take help of these agents and ask about the sales history.
Municipalities:
Some municipal bodies provide the local sales list in their offices or make them available online.
Newspapers:
Newspapers like Economic Times, Times of India etc. are the best sources for your real estate help. These newspapers contain the quarterly sales reports regarding business and real estate sections.
Online Databases:
This also one technique using which you can find a match for your sold property. You can make use of certain keywords like ‘comparable sales’ or ‘comparable’ home sales.
Local assessors’ offices:
Local assessor’s offices provide sales history regarding a particular property. And sometimes they provide a list of sales that have been made recently through which you can browse and find a comparable property.
MARKET VALUE OF PROPERTY IN MUMBAI