How to Determine Property Value as a Real Estate Agent

Real Estate Agent

Working as a real estate agent is a rewarding job. Playing a part in helping people find a home where they can live a fulfilling and contented life is no mean feat. Accurately determining property value is essential so that buyers and sellers alike know exactly where they stand in such a competitive market.

Property values vary for several reasons, not all of which are readily apparent, especially to the layman. If you’re interested in learning how real estate agents accurately gauge the worth of the properties they show people, we’ve put this article together just for you.

Determining Property Value

Gathering information is the first step for any prospective real estate agent. Before going out into the field, real estate agents typically do considerable research into what makes buildings desirable and what makes them less so. This is a complicated pursuit, as there are countless factors to take into consideration.

All information regarding a property is useful when trying to determine a price. The first place seasoned agents look is at the prices of the surrounding buildings or others similar to the one they’re pricing. This gives a general ballpark number and is a useful comparison for getting the process started.

If there are several desirable homes within the immediate area, that counts in favor of the price of the building, as it’s seen as somewhere other people also want to live. People generally view the opinions of others as reliable, so they’re usually a good indication of how everyone else will feel about the area and what they’ll also be willing to pay to live there. Generally speaking, people tend to want to live amongst like-minded individuals and live in similar properties to them.

If the property exists on land within a disclosure state, it’s possible to request information regarding the price a property might sell for. This means it’s a fairly simple process to find out what the houses in a particular area sold for, which is a number often drastically different from the asking price. Otherwise, nothing is stopping savvy real estate agents who don’t mind knocking on doors from asking the owners for this information directly.


Among the most important factors to consider is where the house stands. Prime positions account for a large portion of the final price, especially if the building comes with some land with the title. A detached house in the middle of the country with scenic views and acres of private land will cost substantially more than a house of similar size without land and attached to another.

The only time this isn’t true is if the property is within a particularly desirable part of a city center, in which case even tiny apartments can sell for millions of dollars. The determining factor is still the location, but for different reasons. It all depends on demand, which is another important piece of the puzzle real estate agents must consider to accurately price property.

Sometimes, properties have a price tag that, at first glance, seems to make little sense. When an agent takes demand into account, things quickly become clear. It’s a strange fact that although some properties might be small and poorly finished, demand for a space within the confines of a certain area is sometimes enough to bump the price up astronomically.

This is a good example of why it’s impossible to guess an appropriate listing price for any space without doing some detective work. Failure to look into the surrounding property values of homes within the immediate area would result in a wildly inaccurate estimation, no matter how detailed the appraisal of other contributing factors might be.

Proximity to Local Amenities

When considering the real estate value within towns and cities, it’s important to take into account how close the space is to local amenities. These also tie into location but take a more active role rather than simply being in an open space or an area of particular beauty. A house within walking distance of a park, for example, will increase the property’s price simply by being in a more convenient position for buyers with children.

This makes the property more desirable, increasing demand, which drives up market value. The same rationale is used for properties near local schools, shopping centers, and public transport connections. When searching for somewhere to buy, people are looking towards the future and imagining how their choice will impact their lives after all.

Purchasing a property within a stone’s throw of some useful amenities is ideal for many, driving up the value of the few houses that fall into this category. Supply and demand are the most basic market principles, and property value follows the same rules. Checking the distance to useful conveniences will be one of the first ports of call for all professional real estate agents.

Property Condition

A lot hinges on the current condition of the property, whether it’s old or new. Properties that have housed multiple people over the years are bound to have some wear and tear, which will lower the asking price somewhat. This usually isn’t such an issue, as a fresh lick of paint or a deep clean can do wonders for breathing new life into an old space.

The structural condition of the property is the real issue and needs to be evaluated with caution, whether it’s old or new. Usually, newly built homes must adhere to strict building procedures and reach a certain level of finish to be considered satisfactory before being allowed onto the market. Unfortunately, this is not always the case, and many newly built homes fall far below the level considered to be fit for purpose.

Properties found to have glaring structural integrity issues will sell for considerably less than they would if they were structurally sound. This doesn’t necessarily mean there’ll be no interest in the property, however, as many people look for a bargain to renovate and flip for a profit. Interest in this type of renovation is gaining in popularity, and depending on the location and overall condition may fetch more than you might first expect.

The Cost Approach

Another method real estate agents use to determine the value of a property is to consider how much it would cost to demolish the existing property and replace it with a new one. Knocking a house down takes considerable time and resources, so it’s not as simple as an easy replacement. The land on which the house stands may be worth more without a house on it at all, serving as the perfect foundation for a new property to be constructed.

This means evaluating what the land might sell for once the property is demolished and removed, subtracted from the cost of doing the necessary work of clearing the lot. Alternatively, it might be more lucrative to build a house instead of selling the land for future development, in which case the demolition and construction would both be subtracted from the estimated sale of the new building to determine potential profit.

The idea of constructing a home to a client’s exacting specifications attracts a certain kind of clientele. Some people prefer to hire an architect to ensure their vision is made a reality. In this case, the agent will be happy to sell the lot as a blank canvas, which will be valued while taking into account the potential new house’s value upon completion.

Potential Income Approach

The world of commercial real estate, at its core, revolves around asset management. Houses aren’t just homes for many, they’re a source of a strong and reliable revenue stream. Many people make their living from leasing to tenants who pay rent to a professional tenancy management business, or the owner directly.

Professional commercial realtors know this all too well and value homes based solely on the profit a house can turn when rented to people who prefer to rent rather than purchase. In this case, the money the property is currently generating for the owner is taken into account along with future projections and capitalization rate. Depending on these calculations, real estate agents can determine what a property is worth based solely on the revenue it’s likely to create.

This method is for selling to people who plan to rent the house for profit, rather than to people who are simply looking for somewhere to live. In this way, many of the details that would concern potential occupants are largely ignored in favor of streamlining business and portfolio decisions as a whole.

The Skill of Property Valuation

Understanding what makes a property valuable is what makes a real estate agent great. Property value is simply the number a commercial realtor comes to after they’ve done their calculations, but reaching an accurate conclusion isn’t as easy as you might expect.

It takes a keen eye to take advantage of properties that others might ignore and an even keener one to turn a profit on them.

If this article has answered your questions on property value and you’re anxious to learn more, check out more of our real estate articles today!

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