How to calculate the value of a property for sale

Written by kristie lorette
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How to calculate the value of a property for sale
Learn how to estimate the value of a property for sale. (new,home,house image by Greg Pickens from Fotolia.com)

If you're in the market to buy a real estate property for sale, you'll want to calculate the value of the property before agreeing to pay the sale price or before you start the process of negotiation. While the sale price for the property you're interested in buying may be close to the market value of the property, this is not always the case. With a little research and some quick calculations, you can calculate the estimated value of the property for sale.

Skill level:
Moderately Challenging

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Things you need

  • Home square footage
  • Recent sales prices for comparable homes in the area
  • Calculator (optional)

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Instructions

  1. 1

    Gather data from real estate property sources. Contact local real estate agents in the area where the property is located or pick up real estate magazines and newspapers with real estate sections. One or all of these sources allow you to gather the data you need to calculate the value of a property for sale.

  2. 2

    Find comparable properties. Use the above data sources to find similar properties to the one you're trying to calculate the value of. You want properties that are in close proximity, have similar square footage and the same amenities as the property you're considering purchasing.

  3. 3

    Calculate the price per square foot. First, you have to calculate how much properties are selling for by the square foot. To calculate the price per square foot, divide the sales price of each comparable property by the square footage of each property. For example, if the sales price of a property is £65,000 and the property is 1,000 square feet, then the price per square foot is £65.

  4. 4

    Calculate the estimated value of the property for sale. Using the price per square foot, you can now calculate the market value of the property for sale by multiplying the square footage of the property for sale by the price per square foot you calculated in the previous step. For example, if the property for sale has 1,100 square feet, then multiply £65 by 1,100 square feet to calculate the value of the property for sale to be £71,500.

Tips and warnings

  • The law of supply and demand plays a role in the market value of the property for sale. When there is a surplus of properties for sale, but a shortage of buyers, then buyers have the advantage in negotiating prices. On the other hand, if there is a shortage of properties for sale and a surplus of buyers, then sellers have the advantage in negotiating prices.
  • The market value of a property is officially determined by a professional appraisal of the property, but your calculation will provide you with an estimate of the value.

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