Introduction
Property evaluation refers to all activities that are aimed at establishing the value of an item which may be a house, land, machine, furniture or vehicle. However, this paper will refer to property as a housing unit for a family. Therefore, this discussion will focus on the considerations of evaluating the value of a house located in the outskirts of New York City (Evett 22).
The main aspects observed during property valuation are income, cost, market value, location and government policies regarding this practice. This paper explores the property evaluation considerations a person must observe before selling or buying a property in the United States.
Background
Property valuation is an old tradition that was used to determine the market value of commodities. This practice is believed to have been in existence during and after barter trade. Money had not yet been invented as a medium of exchange and people exchanged goods and services for other goods and services to enable them to get what they did not produce (Ross 21).
This was the best way of getting what people wanted even though it was not a logical approach since it was very difficult to estimate the value of a service or good. Modern societies have different ways of determining the worth of a product through weighing or equating them to other standard ways of measurements.
Therefore, it was necessary to know the value of a product or service that matched the value of its alternative product to ensure a person gets the correct value of the product exchanged.
Therefore, people used to know how many kilogrammes of flour would be exchanged for a goat. However, there were other serious challenges facing barter trade that led to the introduction of money as a medium and means of exchange of goods and services.
Money has simplified all transactions involved in trading activities and mad it easy to determine the value of commodities in the market.
The International Valuation Standards Council is a body that was established in 1981 to develop consistency in the standards used to evaluate the value of goods across international borders. This body ensures local valuation agencies observe ethical and legal issues when evaluating the value of different property.
Literature Review
Soil Properties: Testing, Measurement, and Evaluation by Jack Evett
Jack Evett believes that land is the most important property amongst all others since its value will never depreciate. According to him people should invest their money in real estates and land since these are property that will attract good rates in the coming years. He claims that the United States is facing a huge land crisis due to its huge population and the demand for land to construct houses for settlement and business activities.
In addition, food supply is also a challenging issue and most Americans are looking for land in the suburbs to grow natural foods. He argues that other property like vehicles, furniture, and buildings will depreciate in value and this will not generate good profits. However, the demand for land will ensure people struggle to purchase land at whatever cost the seller will be offering.
As a result, mortgages will be very expensive to finance, and bank loans will attract huge interest rates. However, he claims that the prices of family houses may remain steady, and their value will not depreciate very fast since they are kept well (Ross 18). Family house owners ensure they repair their houses regularly, and this helps to keep them in good conditions.
However, the prices for hiring family houses will escalate due to demand by locals and foreigners to get these houses. The new immigration bill will enable people to migrate to America and get permanent permits that will force them to rent houses. Evett states that the following are some of the most important issues to consider when purchasing a family house.
First, the new owner must evaluate the location of the house in light of the future plans adopted by the local authorities. This will help in avoiding inconvenience caused by relocations and uncomfortable neighbourhood. Lastly, he argues that insurance is an important aspect in property valuation due to risks like fire, earthquakes, flooding and other accidents.
Assessor Incentives and Property Assessment by Justin Ross
Justin Ross is an esteemed property evaluator and has worked in many organisations as a property value assessor and educator in this field. He argues that property evaluation is an old age tradition that changes depending on the needs of the society and the medium of exchange.
According to him modern societies have been transformed by the money economy and everything is now being evaluated against the value of the currency used in that nation. He claims that land and housing units are the main property affected by evaluation and this seems to attract a lot of attention from investors.
He creates a dynamic relationship between housing units and land and explains that land is a natural resource that cannot be recycled. He argues that buildings can be repaired or renovated to uplift their faces, and this restores their value. However, land is limited in supply, and this means that its value will continue to rise as demand for tit increases (Ross 77).
On the other hand, the value of housing units will be determined by the state of the unit. Old units will fetch low prices while new ones will attract heavy prices. In addition, he notes similarities between these two items and explains that their value depends with where they are located, the market trends and the taxation policies imposed on them.
This means that a house or land will be expensive if it is located in a prime area (urban areas that have good transport and communication network). On the other hand, those that are located in poorly accessible areas will be cheap even if they will be of the same size and quality as those in the urban areas.
Secondly, urban regions are heavily taxed to ensure the local authorities provide all essential services to the population; therefore, all property in this region will be expensive.
This means that a region that has high taxation rate will cost more than that with a low one because the tax will be transferred to the consumer. Ross concludes that houses that are old or those located in risky areas have high insurance premiums compared to those that are located in areas that are not prone to risks.
Research and Facts
The following issues are very important when considering a house to buy. People must always consult the relevant authorities to get information about their property before purchasing them even if the property will not be resold. People must stay in good houses that provide all services required by the occupants. Therefore, it is important to consider the following issues before investing in a family house.
Insurance
Insurance refers to the process of safeguarding a property against damages and risks associated with human activities and natural calamities. Nobody is ever sure of what will happen tomorrow and thus people must insure their property to ensure they avoid suffering losses when the property is destroyed. Property insurance involves visiting insurance companies and signing contracts with them regarding safeguarding a property.
The insurance firm must have all the details regarding the house before they agree to enter into a deal with a client. Therefore, they will consult property valuators and other related stakeholders and work with them to establish the actual value of the house. A house that has already been insured will not attract new charges since the firm has most details of that property.
However, it is important to evaluate the value of that property to establish the actual condition of the house since this will form the foundation of determining the premium to be paid to the insurance firms. When an investor is looking for a family house, the insurance premium paid per unit will give clues regarding the risks that the unit is exposed to and this will be an insight into the quality of the house.
A high premium rate may be due to the following important aspects. First, a house that has been constructed in the modern way and has the state of the art facilities will attract heavy premiums since its value will be very high due to the materials, fittings and facilities installed in the house. Secondly, a house that is located in a region where there are various risks that may interfere with its quality will attract a high premium rate.
This means that houses located near roads, beaches, deserts or forests are prone to natural hazards and thus means that there will be high probabilities of risks occurring. For instance, a house located near a beach is more likely to be destroyed by flooding or tornadoes compared to one that is located in the midlands.
Thirdly, houses that are in poor conditions will also attract heavy premiums since they are likely to collapse and require repairs that may cost the owner a lot of money.
Property Tax
Property tax refers to the money paid to the government by all property owners. People must register their property and pay tax for them to ensure the government is able to plan on how to provide essential services to its citizens. Land and houses attract huge taxes since their value is high compared to that of other property. For that reason, house and land owners must be prepared to pay huge taxes to the government.
These taxes are used to provide services like security, water and sewerage, electricity and transport that are very important in all settings. An investor who is willing to buy a house must evaluate the tax levied on it before buying the house since some taxes may be very high and unaffordable by many people.
In most urban areas property tax is very high since the government assumes that urban dwellers are very rich and cannot fail to pay the taxes (Evett 26). In addition, urban centres require frequent services to ensure there is efficiency in disposal of garbage, transport, water and security services. On the other hand, people living in rural areas pay very little property tax since they do not require a lot of these services.
An urban area has a huge population, and this means that the people living in it have many demands; therefore, the government must ensure that it collects enough money from them to enable it to provide good services to the population.
Sometimes property tax can be higher that renting houses since the government assumes that once an individual has constructed a house there must be security for it whether there is someone living in it or not (Ross 78).
Therefore, this makes property tax in urban areas to be very high and keep changing every year. An investor should use the property tax index to determine his ability to finance the house in terms of taxation since this is a mandatory requirement in all nations.
Maintenance and Repair
A house is a complicated property since it requires frequent maintenance and repair whether an accident occurs or not. This means that the prices of houses depreciate and thus there is the need to repair them to ensure their faces are renovated. However, there are different types of houses that require different repair services and most of these may be determined by the following aspects.
First, a new house will require no repair services in the next two or three years after it has been occupied; however, an old one may require periodic repairs since most of the material used to construct it may be getting old and worn out. This means that there will be the need to replace tiles, ceilings, cabinets, floor and windows.
In addition, an old house has already been exposed to some elements of nature like sunshine and hailstorms that may require the owner to replace the iron sheets. In addition, a person who has a family and kids that are between 4-12 years should be prepared to conduct regular repair and maintenance since children are very stubborn and may break some items in the house when playing.
Moreover, an individual should consider investing in a house that has very few delicate items like glassware since these are easily broken and thus may lead to unnecessary expenses in terms of repairing and maintaining them. However, if it is an office, there is no problem having a glass wall since there are not children to break the glasses.
However, it is important to understand that irrespective of the house, children or other risky items associated with houses an individual must conduct regular repair and maintenance services to ensure the house is of high quality and attractive should he decide to sell it ion the future.
Rentals
Rent is a headache tenants have to grapple with during end months since they constitute a large portion of their expenses. This means that most people especially in the United States pay a lot of money as rent. This figure is even higher that the amount used to buy food. However, since people can not live in the open space, they must rent or buy houses to live in and ensure they are comfortable.
It is important to understand and that a good house will cots very expensive compared to an average and a poor one. However, everybody cannot live in good houses since people have other urgent needs like education, loans and school fees; therefore, they cannot use all their money to pay rents.
In addition, no one will ever live in the best house in the world since there is no appropriate definition of this term. A house can be good but not affordable, and this does make it the best house (Ross 87). On the other hand, it can be affordable but of poor quality, and this means that people cannot live in it.
Therefore, an investor should compare the price of renting a house for a period like 10 years and buying it through the various financing options available. However, the difference between buying and renting houses will be determined by other factors like availability of funds and repayment periods for mortgages.
Individuals should consult the relevant house agents, newspapers and websites to find out how much it will cost them to buy or rent houses before they decide to take the best amongst the many options available. The United States has a wide disparity between expensive and cheap houses depending on their locations, standards, age and facilities installed in them.
Property Description
The description of a property speaks more than any other aspect of property evaluation. Therefore, this should form the cornerstone of the evaluation process since all other aspects like insurance, tax and rent are determined by the description of a property. A property is described in the following ways; first, an individual evaluates the age of a property before deciding whether to buy it or not.
A newly constructed house will cost more than an old one even if they are of the same quality. On the other hand, a new house that has been previously occupied even by one tenant will cost different from a newly constructed one. Moreover, the value of houses depreciates as time moves and this means that a 10 year old house will cost more than a 20 year old one.
Secondly, the materials used to construct a house will also determine its value and the people who can buy the property. A property constructed from wood, glass and marble will cost more expensive compared to one that is constructed from stones or bricks only. There are other materials that can be used to reinforce the quality of a house and the more expensive these materials cost the more it will cost the investor to buy the house.
Utilities
The local authorities and engineering and construction boards in the United States must evaluate a property before it is declared for people to live in it. This means that there are regulations that must be observed before a person is allowed to contrasts a house to enable the local authority incorporate the property in its plans.
Therefore, an individual must seek approval from the local engineering and construction board and the local authority to ensure that he has conformed to all regulation of constructions. This usually begins with consulting architects that will give a client the plan of a region and how services are provided (Evett 109).
The client will also see the location of his property and how it interacts with other public utilities like water, sewerage, electricity and roads. These items are very important all constructions since they determine how a house will be accessed from different locations.
In addition, they determine the hygienic levels of a property and how wastes will be disposed. Therefore, an investor should evaluate the proximity of a property to the main road, hospital, school, church, urban centre and sports facilities.
This will help the home owner to know how much it will cost him get these services. In addition, it will help him to plan his routine well and keep time to attend to his duties and that of his family.
Secondly, sewage and water network are very important, and an individual must know where he will get water and dispose his waste. An individual must buy a house that has reliable water and electricity supply and has a working drainage system to ensure the person lives in a healthy environment.
Income
People must not force themselves to buy what their pockets cannot afford since this will affect their budgets and expose them to financial constraints. Even though, people have different plans, and everyone wants to live in a good house this has never been possible all the time because of several reasons. Money speaks louder than words and wishes; therefore, people should learn to live within their incomes.
Most Americans earn an average salary that can afford them good houses (Ross 108). However, acquiring these good houses is determined by their prices, location and taxation and thus they should allocate sufficient amount of money to rent or buy houses they can afford. Sometimes financial institutions offer attractive terms to ensure people are encouraged to apply for loans.
These loans are very important in providing quick access to property ownership since banks give people enough money according to their plans and financial abilities. However, these offers should not be considered at the expense of other needs of the family like food, education and medical bills.
Even though, there are mortgage firms that give people soft long term loans to buy assets like houses, they should every careful not to spend the whole of their working lifetime to pay for a single housing unit. People should not spend more than what they can since this will means that they will be creating unnecessary debts that can lead to repossession of their property.
Therefore, it is important for people to purchase or rent houses they can afford to pay without straining their budgets and inconveniencing other needs. It is very illogical to spend 80% of an individual’s salary to pay rent or bank loans, yet there are houses that can be purchased at low costs.
In fact, an individual’s income and savings can determine whether the person can rent or buy a house and also give an approximate value of a house the person is capable of buying or renting.
The current financial situation cannot allow low income earners to get loans to buy houses since the interest rates on these loans are very high. In addition, the high inflation rate makes people to give food and medical needs first priorities and consider other needs later.
Market Values
Property owners do not just wake up and decide to fix the value of their property since this would cause a serious crisis on the market. Even though, people use their money to construct, buy or rent houses or land they cannot decide their prices. Property evaluation is similar to other business activities that take place within a country or outside its boundaries.
Therefore, there are other market factors that will determine the value of a property when all other factors held constant. The most important external factor is the value of a currency in the international market. This means that a currency that has a high value in international trade will means that the economy of that country is very stable.
For instance, the value of the United States’ dollar has been fairly stable for a long time, and this means that the value of its property has remained high. On the other hand, when a currency has a low value on the international market the economy of that country will be very poor.
Even though, the price of land and buildings will be lower in the latter case people will not be willing to invest in them since there will be no demand for real estates or land. Therefore, people should consider buying a property located in nations that have high currency values like that of the United State since they will be sure that their property will appreciate in value, and they will sell it at a high price.
Documentation
Documentation is an important part of property ownership since it gives an insight into the legitimacy of a property and the transactions involved. An investor should demand to see the legal documents from the registrar of lands or property to evaluate the legitimacy of that property. Some unscrupulous traders have conned people their money by selling to them property that belong to the government.
Most people have been conned into buying land belonging to schools, churches or other public amenities like parks and road. Therefore, it is important to seek to know whether a property belongs to an individual (private) or to the government (public). Secondly, it is important to know that the person whose details appear as the owner of the property is the high physical owner recognised by the government.
This means that the individual must produce a land ownership permit (title deed) to prove that he is the owner of a property. Secondly, the house should have all the legal documentation that shows the construction adheres to the standards set by the government and engineering and constructions board.
Security
It is important to ensure that their property is secured from man made and natural disasters that may interfere with them. This may occur as damages or destruction of the property (Evett 56). However, people must not focus on protection of their property and forget about their health and wellbeing. Therefore, they should focus on protecting their property and ensuring that their health is safeguarded.
Assumptions
Most people assume that an attractive property is always expensive and forget that the value of a property is determined by many factors. In addition, most house owners believe that their property will appreciate in value after some time and forget that they must repair and maintain the quality of heir property.
Moreover, they forget that even if they try to maintain the appearance of their houses their values will depreciate compared to that of land. Lastly, they believe that the government should not tax private property; however, they fail to understand that they need security, roads, and water and sewer services which are offered through the funds obtained from taxes collected from different departments.
In addition, some people have always believed that it is very difficult to estimate the value of an old property. However, this belief is false since property evaluators are able to estimate the price of all property based on the procedure and elements observed.
Conclusion
People have always been fascinated by prices of commodities that are important in their daily lives. Food and fuel costs are daily struggles that make people frustrated or happy depending on their financial impacts on their budgets. However, another nightmare is slowly creeping in the minds of most Americans as the demand for housing units continues to soar.
The United States Immigration Department is creating room for more immigrants that will lead to struggle for the limited houses. Therefore, this will force home owners to raise the prices of their houses, mortgage rates will increase, and financial institutions will raise interest rates on loans.
However, these issues will not change overnight since there are some considerations that must be observed before the price of a property is increased or reduced.
Works Cited
Evett, Jack. Soil Properties: Testing, Measurement, and Evaluation. New Jersey: Prentice Hall, 2008. Print.
Ross, Justin. Assessor Incentives and Property Assessment. New York: McGraw-Hill, 2011. Print.