When
assessing the value of a property, many investors and other commercial property
buyers look at comparable sales to determine the true current market value of a
property. The comparable sales can show you exactly what properties are selling
for, not just the asking price. If you know three or four properties of similar
characteristics sold for about the same amount, then you can determine what the
value of your property is. Don’t ever just look at the asking price, as it can
be as far off as the owner wishes. He or she may be dreaming in regards to what
the Kenya property is really worth!
Comparable
sales, or comps, are the properties that have sold around the subject property
that are zoned identically, and are about the same amount of acreage. It also helps
if the comparable sales are from properties that have similar uses.
Comparable
sales may not always be the most accurate for your specific property. They
could be from many years ago, may not be of similar use, many not have the same
characteristics such as the availability of utilities, or may not have a
comparable amount of road frontage, or could be a considerable distance from
the subject Kenya property.
In
order to get around this problem, you must use the closest properties that you
can. You simply adjust the price according to the changes in the market or
property characteristics.
For
example, if a comparable sale was from 2001, and the current year is 2006, then
you can adjust the price according to the appreciation the overall commercial
market has experienced in a specific area.
Or,
if the subject property has a total road frontage of 200 feet, and the
comparable sale property has frontage of 1000 feet, you can adjust the price or
value appropriately.
As
you can see, finding the true current market value of a property can take some
investigation and adjustment in relation to the properties that have sold in
the past. The more recent and similar the comparable sale is, the easier and
more accurately you can assess the true value of the property.
It
is a good idea to collect as many comparable sales as possible and take
inventory of each. What are the characteristics? What are the uses? Assess each
one individually and then group them together to determine an overall
consensus. You should be able to determine the current market value at this
point. The more properties you have to pool from, the more accurate a number
you will have.
Very
often brokers or agents supply you with comps from the area of interest as part
of the service of selling the subject property. If you are not familiar with
the area, you must be leery of the comps that they send you.
I
have received comps of properties in the most affluent areas for a subject
property that was positioned in a lower to medium class area which completely
misrepresented the true market value of the property. Unless I had investigated
further and asked many questions, I could have easily taken this property as a
true comparable sale, and would have expected a far greater return than what I
really would have experienced.
Unfortunately,
as much as you want to trust the information that you are given by a source,
you must always perform your very own investigation because brokers and agents
are there to sell their properties. Many of them are honest and will do the
best they can to give you the most accurate information. However, there are
those who will dupe a buyer in order to sell the property and receive their
commission. It is important to be aware of these tactics. Although we don’t
like to admit that they happen, they most certainly do.
Comparable
sales are really the only way you can determine the true value of a property.
It may take a comparable from another city, or even county of identical
characteristics to determine the most accurate value. If necessary, ask a
trustworthy broker or agent for assistance, as they will know their market
inside and out, and be able to point you in the right direction as to what the
property is really worth. Get two or three opinions in order to validate any
information you might receive.
Browse through our main site on www.kenyan-real-estate.com
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