How to value a not so old house?
Posted: November 21st, 2021, 9:40 pm
Hi All, This is regarding individual houses. I am noticing that, the sellers are quoting ridiculously high price for the building. ( I have excluded the land price here). I am finding it difficult to value a building which is neither old nor new. Its actually a 9 year house. Can someone explain how to value it?
I have read about depreciation formula. That assumes 60 year lifetime for individual houses which to me looks very high considering, these things will keep getting outdated. Even if we go by this formula, the depreciation for a 9 to 10 year property is 1/60. Lets say the construction cost was 1 crore, 9 years ago. My doubt is, should the building value be present value of 1 crore (adjusting for inflation) - depreciation or 1 crore as is - depreciation?
Also, should we add some premium to the final value considering, there is no hassle of construction and one can move right away?
Slightly off topic: How do you guys handle this?. The quoted price is unrealistic to begin with. And they expect a negotiation of 5 to 10% max. If we make a reasonable offer, they will ridicule the offer. And eventually they will find some buyer. So these depreciation formula etc are of no use. Unlike the developed countries, there are hardly any decent properties here.
I have read about depreciation formula. That assumes 60 year lifetime for individual houses which to me looks very high considering, these things will keep getting outdated. Even if we go by this formula, the depreciation for a 9 to 10 year property is 1/60. Lets say the construction cost was 1 crore, 9 years ago. My doubt is, should the building value be present value of 1 crore (adjusting for inflation) - depreciation or 1 crore as is - depreciation?
Also, should we add some premium to the final value considering, there is no hassle of construction and one can move right away?
Slightly off topic: How do you guys handle this?. The quoted price is unrealistic to begin with. And they expect a negotiation of 5 to 10% max. If we make a reasonable offer, they will ridicule the offer. And eventually they will find some buyer. So these depreciation formula etc are of no use. Unlike the developed countries, there are hardly any decent properties here.