Applying the principles of real estate valuation

1. The highest and best use principle
    The best and best use case principle is based on the view that two or more properties may have physical similarities or similarities with other properties, but may differ significantly in use. An optimal used asset is the basis for determining its market value.
    For real estate, price appraisers should consider both the highest and best use of the land as bare land and the highest and best use of structures on land.
    The unique properties of the soil determine the optimal use. Therefore, the market value of land based on the concept of "highest and best use" reflects the usefulness and sustainability of land in the context of the market, with buildings on land making the difference between vacant land value and total market value of the reclaimed land.
2. The principle of substitution
With this principle in real estate valuation, buyers often do not pay for a property more than the cost to acquire the equivalent land area and build a corresponding building, unless due to time conditions. , unfavorable and risky.
3. Principles of forecasting
The economic changes, the cycle of a land as well as the state management policies on real estate and the real estate market in the future have an impact on the value of real estate. Therefore, in real estate valuation, it is necessary to forecast the fluctuations of these factors in order to estimate real estate values ​​correctly.
4. Principles of supply - demand
The market value of real estate is determined by the interaction of supply and demand forces on the real estate market at the time of valuation. Therefore, in appraising real estate prices, attention should be paid to analyzing supply and demand factors in the market, especially the purchasing power, the situation of real estate business investment, state policies and policies towards the market. real estate school.
5. Principle expected future benefits
     The market value of real estate is measured by its ability to generate income, the expected future benefits of the property, especially for investment properties. Therefore, in the valuation, it is necessary to closely predict the profitability of real estate.
6. Principles of contribution
     The value of each part of real estate will contribute to the total value of the property. Therefore, appraisers should apply this principle when making adjustments to the value of comparable properties to estimate the value of real estate appraised.
7. Appropriate principle
     Real estate needs to be adapted to its environment and adjacent properties to achieve maximum profitability or highest usefulness; therefore it is necessary to analyze whether the property is suitable for the environment, with adjacent properties, and between land and property on the property when determining the best and most effective use of the property. most fruit.
8. Principle of balance in land use and development
    The selling price of a land location does not necessarily indicate that the adjacent land must also have such a value.
    Appraisers must consider the balance of land use and development by understanding effective land use planning policies and principles.