When it comes to selling or buying a property, it is essential to know how to correctly estimate the value, in order to be able to perform a good negotiation.
Many see the experience of buying, renting or selling a home as a path full of questions, especially regarding the right price of the house. Generally, the appraisal is done by licensed real estate agents or professionals in the field.
Determining the value of a property is certainly not an entirely simple operation, as there are several factors to take into consideration.
In this article, we provide you with a complete guide on all the steps to take to calculate the most likely market value of your property. In particular, we will explain how:
Calculate the market value
Calculate the commercial area of
the property Calculate the walkable covered areas
Calculate the uncovered areas and appurtenances
Calculate the value per square meter
Calculate the various coefficients
Calculation of the overall value of the property
How to calculate the value of a property: values and coefficients
Selling or renting a home is never something simple or immediate, it often takes a long time, from months to years. Many times the offers are slow in coming, sometimes they don’t even arrive at all and in other (few) cases they flock. Have you ever wondered why?
Behind the absence of an offer, an excessive estimate of the value of the property could be hidden. On the contrary, when the request abounds it could mean that the real estate agency has underestimated the house.
For this reason, knowing the correct calculation methods to determine the value of the property will be extremely useful to you. In fact, in this way, you will be able to buy, rent or rent or sell your property at the fairest and most convenient price.
Below, all the essential values and coefficients to calculate the value of the property.
How to calculate the market value
Not to be confused with the cadastral value of the property, which is itself useful in case of purchase, as it serves as a basis for calculating registration, mortgage and cadastral taxes.
Specifically, the most likely market value is the estimated amount at which the home is sold on the valuation date between buyer and seller. This is a value that can be expressed according to the technical and economic characteristics of the property.
Below, we will show you the calculations to be performed step by step.
How to calculate the commercial area of the property
We would like to point out that the commercial surface must not be confused or made to coincide with the walkable surface. To calculate the commercial area, it is necessary to add:
- Walkable covered surfaces, as well as non-walkable ones: by the latter, we mean the internal and external walls of the house
- All uncovered surfaces, such as terraces, gardens, balconies and appliances
The surfaces listed are then added up taking into account a series of coefficients, which may vary according to the internal and external conditions of your property.
So let’s continue analyzing them one by one.
How to calculate the walkable covered surfaces
The usable surface must be calculated at 100%. Other values are then added to its value based on specific percentages, such as:
- Perimeter walls of the building: they must be calculated at 100% in the surface, only up to a thickness of 50 centimetres. In the event that it is an old building, and therefore the walls are probably thicker, only the area of 50 cm will be used in the calculation of the value.
- In the case of a building with perimeter walls in common with other adjacent apartments, only the thickness of 25 cm will need to be added.
- If the property has an attic, only 75% of the attic surface can be added up, but only if it is a minimum of 2.40 meters high. In the event that the attic room is not habitable, therefore even partially with a height of less than 240 cm, its surface area will only be calculated up to 35%.
- If the apartment has a mezzanine, it will add up to 80% of its surface, if it is at least 2.40 meters high. But if it is lower, only 15% of the surface will add up.
- If the property has a veranda, it will add up to 80% of its surface.
- The habitable taverns and basements will be calculated at 60% of the surface.
How to calculate the uncovered areas and the appurtenances
- The surfaces of balconies and solar paving add up to 25%, for balconies up to 25 square meters. While the surplus surfaces are calculated at 10%.
- The surfaces of the terraces and loggias are calculated at 35% up to 25 square meters, while the surfaces exceeding 10%.
- Penthouses up to 25 square meters account for 40% of the surface.
- Porches and internal patios account for 35% of their surface.
- Courtyards up to 25 square meters add up to 10% of their surface.
- Gardens up to 25 square meters add up to 15% of the area.
- Cellars and attics with a minimum height of 1.5 meters add up to 20% of the surface.
- Indoor garages and car boxes, in the case of collective garages, are calculated from 45% to 60%.
- The uncovered garages will be added upon the basis of 20% of the total area.
How to calculate the value per square meter
To calculate the value per square meter of the property, it is necessary to take into account a series of coefficients that will be used to determine the actual price of the apartment.
As a first step, the location must be considered and therefore, as the very first discriminating factor, whether the house is located in the city or in the countryside. The same thing obviously applies to the neighbourhood, whether it is in the centre or in the suburbs. Also to consider the internal and external conditions of the property as well as its general state of conservation.
In this case, the Revenue Agency takes into account the following parameters. How?
Monitoring them individually through the so-called “Real Estate Market Observatory” (OMI), which is updated every six months.
This type of real estate quotations identifies, for each homogeneous delimited territorial area (OMI area) of each Municipality, a minimum and/or maximum range per unit of surface in euro per square meter, of the market and rental values, based on the type of real estate. And the state of conservation.
The OMI quotations are created to be indicative and cannot in any way replace the actual estimates, calculated by real estate agents or other professionals in the field.
Calculate the various coefficients
Coefficients of merit
In addition to the surface area and the price per square meter, a series of merit coefficients influence the calculation of the most probable market value of the property, which could increase or decrease the value of the apartment. Specifically, these are values expressed as a percentage of the characteristics of the home.
Coefficients according to the plan
These are surface area values per square meter that vary according to the floor in which the property is located, namely:
- Basement (-25%, with or without elevator)
- Ground or mezzanine floor (-10% with garden and -20% without garden)
- First floor (-10% with or without lift)
- Second floor (-3% with lift and -15% without lift)
- Third floor (0% with lift and -20% without lift)
- Upper floor (+ 5% with lift and -30% without lift)
- Top floor (+ 10% with lift and – 30% without lift)
- Penthouse / terrace (+ 20% with lift and -20% without lift)
Coefficient based on the state and age of the property
As regards the rental status, however, there are other coefficients to consider. In particular:
- Free dwellings (coefficient at 100%)
- Rented dwellings with free rent (-20%)
- Homes rented seasonally (- 5%)
The age of the property and its state of conservation are also important factors, therefore a distinction is made between:
- Property to be restored (-10%)
- Property in good condition (0%)
- Renovated property (+ 5%)
- Finely restored building (+ 10%)
- New construction (+ 10%)
Furthermore, coefficients relating to heating, exposure and brightness affect the calculation of the value of the property.
For example, if it were a house with independent heating, its value will rise by 5%, or perhaps a house with a panoramic view or very bright, it will be worth 10% more.
Calculation of the total value of the property
At this point, knowing all the values necessary to calculate the value of the property, you can apply the formula indicated above. In summary: the commercial area is multiplied by the quotation per square meter and by the coefficients of merit.
Once the value of the commercial area has been calculated, the values determined by the Real Estate Market Observatory (OMI) can be taken as a reference based on the area in which the property is located, at the time of the sale or the previous one in which the price has been set. Lastly, the coefficients relating to the characteristics of the house will be applied.
Everything you need to know about calculating the value of a property
As you have seen, perhaps at the first impression the operation to calculate the value of a property appears simple to carry out.
After all, yes, the calculation is quite intuitive, but first of all, it is necessary to determine a series of values and coefficients that can clearly make the difference and increase or decrease the value of the home.
In this article, we have explained everything you need to know about estimating the value of a property. Keep the information in this article in mind so that you are prepared for any rental, purchase, or sale action.
And if you have read this article, you will most likely also be interested in knowing how to calculate the profitability of a property, which is nothing more than its rate of return in case you want to put it into income.