How to verify the market price of a housing unit in Prague

You look at an advertisement and your mind is busy with the ideas „is it the market price or the price to negotiate?“ or „how much could the price be reduced?“ or „what the hell do they think they´ll get for it?“ Before you decide to buy a property, you need to be sure that you won´t overpay on it. And if you know that the offer is higher than the market price, you need to know what price to try to agree on with the seller when negotiating. Likewise, if you want to sell a property, you need to know what the fair price for it is and therefore how to set the offer so that it is marketable.

Different people, different market price

To begin with, it is necessary to say that there isn´t only one market price of real estate. People often ask me for an expert estimate, and even though I’ve done it a thousand times and sold hundreds of properties, I can’t predict the market price with certainty. It is subject to several subjective influences.

The buyer and their power to influence the price of real estate

Imagine two scenarios. In both situations, the person wants to buy an apartment but each time they are motivated to do so by something a bit different. In the first case, they chose a property in the location where they work or where their friends live. There is no other comparable offer in the given place, they are solvent and in a hurry to buy. It is then highly probable that they will pay more for the property than the other person interested. The other one wants to buy the same apartment or house only as an investment for further renting. Their main goal is to earn, so they will carefully assess the purchase price in order to buy the property for the lowest possible amount. Therefore, the same property can be sold for a little more money in the first case, and, to the contrary, a little less in the second. However, the price difference should never exceed 5-10% compared to the market price estimate.

The market price is also determined by the seller and the presentation of the property

In addition to the buyer, there are other subjective factors that can affect the market price of real estate. One of them is the owners themselves. If they need to sell the property quickly, they usually accept the first offer or set a lower price straight away. But if they are in no hurry, they will wait for the right buyer who´ll be willing to pay as much as possible for the property. Finally, the market price is influenced by the presentation of the property. An apartment or house that is well prepared for presentation to parties interested (meaning it will be freshly whitewashed, tidy, free of excessive or unattractive furniture and objects) will be sold at a higher price than real estate that wasn´t made ready for sale.

We need data on real sales for estimation 

Now it´s the time to talk about how to price apartments. Although there is a whole range of methods, I will show you only one and that is the comparative method which is the most accurate for a common type of real estate. What is it about then? We simply compare the price of the selected property with similar properties already sold. You may be wondering how to get such information. Most people follow various random offers on the Internet but this isn´t something I will recommend to you. These ads might include incorrectly set prices and the estimate would then be inaccurate. Only the prices of property really sold are important for us and we can find them in the www.cenovamapa.cz or www.cenovamapa.org applications. Both contain data from purchase contracts recorded in the cadastre, that is the information on the prices that were agreed to in reality between the seller and the buyer. Each of these applications has its own specifics, so it isn´t clear which will be better for you. For example, you can find land only on the cenovamapa.cz website, while development projects are better presented on cenovamapa.org. I personally use both tools and will advise you on how to work with them to make them useful for you.

 Look for prices of real estate in them that:

• was sold in the immediate vicinity, such as in the same neighbourhood or streets as the property you´ve chosen,
• is of similar character (if we compare an apartment in an older brick building then we look for sales only in similar buildings),
• has been sold recently, such as 6 – 12 months ago,
• is of similar square area (e.g. if we value an apartment with an area of 50m², we look for sold apartments with an area of 45-55 m².

This way, you should get minimally 5-10 selling prices to get an estimate that is sufficiently accurate. I recommend recording the key information in a spreadsheet (e.g. in Excel) about each of the found properties such as the address, total price, square area, price per m² and date of registration in the cadastre. Sort the individual offers according to the price per square meter, from the lowest to the highest. At first glance, you´ll already see that comparable properties are sold at different prices in the given place (I call the range from the lowest to the highest amount price variance). The difference in prices is caused both by the subjective influences we talked about at the beginning and by the specifics of individual properties.

You will pay extra for a great view and a park nearby

We can easily explain the specifics of real estate with the example of an apartment. It can be located on the ground floor, or perhaps on the second floor, it can be before or after reconstruction, it can have a nice view or the windows face the opposite building. These are all specific features of real estate and there are many more. Which are they and how do they affect the market price? The following table will clearly show you this:

The apartment price is generally increased by	The apartment price is generally decreased by
private ownership	cooperative ownership, condominium, Ltd.
well-kept surroundings of the building	unkempt surroundings of the building
nice view	unattractive or no view
window orientation to the south or south-east	window orientation to the north or north-west
low number of floors in the building	many floors in the building
few apartments on one floor	many apartments on one floor
elevator in the building with a higher number of floors	no elevator in a higher building
calm and quiet place	busy road
low monthly utilities	high monthly utilities
shops, supermarket, doctor, school etc. in proximity	amenities far away
public transport, transport links in proximity	transport links located far away
location on a higher floor with an elevator	location on the ground floor or basement of the building
apartment is after reconstruction	apartment is before reconstruction

 

You can see from the table that the market price of an unreconstructed apartment, located on the ground floor, will probably be close to the lowest prices in the variance, while the market price of a reconstructed apartment, located on the upper floor, will be closer to the highest prices in the variance price.

In this way, it will be easy for you as a buyer to find your way around the individual real estate offers. If one of them is for a good price, it is better not to hesitate to buy. On the other hand, if you find an overpriced offer you´ll know what price to try to negotiate.

As a seller, you will be able to set the price offer right so that your property could be sold.