A business must develop an informed opinion about the market value of a particular property. This process is commonly known as property appraisal and is often done by a licensed appraiser. Sometimes companies take property valuations for granted, especially smaller companies that have little experience in leasing and real estate. Having an overview of some of these common appraisal terms can be very helpful and an effective tool for businesses looking for a great office space structure that is also a great real estate bargain.

Market value monitoring

One of the shortcomings of some companies when looking to invest in office space is not obtaining substantial information about a particular business location, which can result in the company suffering a financial loss in acquiring said office space. Market value monitoring is very important to obtain an up-to-date and accurate economic base for valuation purposes. No business would want to be tied to a lease or purchase an overpriced property; A building owner would also not want to have a cheap lease. To protect the interests of both parties, the projected value and market expectations must meet at a common point and this can only be achieved by closely monitoring the market value.

Comparable Business Sales

Property valuations have three main types of approaches: sales, cost, and income comparison. A sales comparison approach is most often used for valuation purposes. It’s easy to understand and is often used to compare prices on office leases and other types of real estate appraisals.

This particular process involves two different steps: finding or selecting comparable properties and then making any necessary adjustments to the numbers.

Selecting any matching sale is the hardest part of the approach. Since it is so important to an accurate analysis, it involves research and investigation to find the properties that are most like or equivalent to the property being considered.

The next step in making the appropriate adjustments involves a variety of techniques that an appraiser may use. One of the most widely used techniques of this approach is matched-pair analysis.

Matched pair analysis

Matched pair analysis is one of a variety of effective techniques for making the appropriate adjustments to comparable sales. This technique consists of three steps:

• Location– The first step in performing this analysis is to find sales that are comparable in all areas except the particular item that is a potential determining factor. It would be preferable to find at least three sets of identical pairs for each subject being compared. Often this is not feasible, so many times adjustments must be made to bring the compared objects as close together as possible.
• evaluating– The next step is to evaluate the sale price of each of the pairs, either by the gross sale price or by the sale price per square meter or size.
• reviewing– The last step is to review the result of this comparison to see if it is a logical result, such as similar units where one unit has extensive outdoor gardens and the other does not. Is the price of the former reasonable for extensive landscaping, or not?

Finding valuable office space for a business and being able to do some sort of comparison is not always an easy thing to do. Using the comparison form above can be a valuable addition to a company’s arsenal against the high costs of leasing or buying property. This tool can definitely give you an edge in the negotiation process when looking for cheap office space!