There are many different ways to determine the value of property in the real estate market, often with somewhat incongruous results. In fact, the use of varying methods for finding value is often at the heart of negotiations when buyer meets seller.

One could choose to evaluate an income-producing (rentable) property, for instance, based on other comparable properties in the neighbourhood, or based on the net operating income annually of the unit itself, or perhaps by analyzing the return on equity versus other available investments of similar risk.

Sound complicated? It can be. The good news is that in the vast majority of home-buying decisions, the usual technique applied is the more-simple comparison method. Today I'll outline how this is used:

Comparative analysis is actually fairly straight forward, but should be done using a professional, well-versed Realtor in order to get the most accurate results, since assessing the relevance of the information used is often more an art of experience than a science.

Properties fundamentally resembling the unit being evaluated are found (most often those that have recently sold) and scrutinized for their similarity to the chosen property. Of most importance are nearby location, overall size, and number of bedrooms, washrooms, parking, etc. Obviously we will also want a similar lot size, number of storeys, and the like as well.

After several (hopefully recent) sales are found, the process moves to another stage, which involves identifying differences between the sold properties and the one we're considering, and assigning appropriate adjustments to value based on these differences.

For instance, does the property in question have brand new hardwood floors? Than this would usually raise its value versus a comparable home with laminate flooring. And so on...

Once the adjusted values of the comparable properties are determined, and they are skewed for any market appreciation/depreciation (change in overall value) in the time period since their sale, then we should have a group of prices that represent the approximate value of the property in question.

Hopefully your comparable prices are fairly close together. If not, your Realtor will further inform you as to why discrepancies may exist. If there are large differences in value, you likely haven't assessed all of the influencing factors correctly.

Using this technique should give you a reasonably accurate idea of the fair market price for any property.

Would you like to know what your property is worth? As always, call me and I'll be happy to get you started.

Until next time,

Shaun Nilsson
1-888-712-7888

Shaun Nilsson, The Downtown Guy
		About the author:
		Shaun Nilsson, 'The Downtown Guy,' is a downtown Toronto Realtor, and avid connoisseur of the downtown lifestyle.  He writes about real estate, life, landmarks and culture in the heart of the city, and provides relevant, street-level advice for real estate buyers, sellers and investors.  As both a writer and a professional real estate salesperson, Shaun keeps firmly tuned-in to the pulse of the city, in order to best provide timely info to his readers and clients. Shaun lives in downtown Toronto, in the city he loves, happily serving his amazing clients and friends.
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