Importance of Analyzing Market Trends in Real Estate Appraisal

value-riseA market is different from a neighborhood. In choosing comparables and reconciling values, it is worthy to consider the distinction between the two in analyzing market trends. This is vital in real estate appraisal.

A neighborhood is a grouping of complementary land uses. This is a geographical term and includes residential, commercial and even industrial uses within a neighborhood. Meanwhile, a market is the sum total of all competing properties of buyer and sellers in a given area or region under consideration. A market study is focused on competing properties. Therefore, in conducting market analysis one should not limit themselves in analyzing properties in a given geographical unit.

Most appraisers can easily identify appreciating market indicators. Some of which are the undersupply of competing properties and listings; reduced marketing time; an increase in list price than the previous sales price.

The presence of one or all of the indicators would be a signal of market appreciation and the appraiser should consider it in making adjustments and choosing comparables to produce credible reports.

The other method in analyzing the market trend is to distinguish the market if it’s a seller’s market or a buyer’s market.

In a seller’s market where a high level of competition exists, a seller will make concessions which are either non-existent or very minimal. This is in contrast to a buyer’s market where an abundance of competing properties exist and sellers are motivated to offer concessions to stimulate contracts.

A reliable appraisal, especially in dynamic and growing markets such as Metro  Manila and Metro Cebu, must consider real estate trends to offer the most insightful and complete valuation. When in doubt, consult with quality-oriented and experienced valuation professionals that specialize in market analysis.

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