Conditional Model of Real Estate Valuation for Land Located in Different Land Use Zones

Agnieszka Bieda

doi:10.2478/remav-2018-0010

Abstract

Abstract* Real estate valuation is carried out correctly if it takes into account all the conditions occurring on a given market at the time of its performance. One of the important determinants of correct valuation is the proper determination of the land use class of the property being valued. It is equally important to find similar properties with the same land use classes as the property subjected to valuation. This does not pose a problem when a property is located within an area with one specific land use zone. If, however, its land use zoning is not homogeneous, finding similar properties may be difficult. If those contained in the database of comparable properties differ from the real estate being valued with regard to land uses of individual areas or proportions of areas with a specific use, it is suggested to divide transaction prices obtained for the whole property into components of those prices that correspond to the fragments of this property with specific land uses. In this paper, the conditional model has been used for this purpose.

Highlights

For each property valuation, it is important for the obtained value to reflect market conditions existing at the time of valuation
For properties from the comparable database, the values determined from the unit transaction price were, respectively, 50% higher, and 18% and 10% lower, whereas for the property being valued - 29% higher than the value obtained in the conditional model
It is frequently the case that a common arithmetic mean of transaction prices is closer to rational valuation than a complex model (ADAMCZEWSKI 2006)

Summary

Abstract*

Real estate valuation is carried out correctly if it takes into account all the conditions occurring on a given market at the time of its performance. It is important to find similar properties with the same land use classes as the property subjected to valuation. This does not pose a problem when a property is located within an area with one specific land use zone. Its land use zoning is not homogeneous, finding similar properties may be difficult. If those contained in the database of comparable properties differ from the real estate being valued with regard to land uses of individual areas or proportions of areas with a specific use, it is suggested to divide transaction prices obtained for the whole property into components of those prices that correspond to the fragments of this property with specific land uses.

Introduction

Methodology of property valuation using the conditional model

Exemplary valuation of land property covered by different land use zones

Validity of valuation with specifying different land use zones

Findings

Conclusions