Which valuation method is suitable for a single-family home?

A comparison of the methods: Understanding the market

The gold standard: The hedonic method (comparative value method)

If you go to the bank today to apply for a mortgage for a standard single-family home, you will almost always encounter this valuation method EFH .

• The principle: This single-family home valuation method is based on statistics. Your house is broken down into its characteristics (location, size, volume, condition, year of construction). This data is then compared with thousands of actual property transfers (sales) in the database.
• Why it's suitable: A detached house is a consumer good. Its value is determined by supply and demand. The hedonic valuation method for detached houses reflects precisely this: What were other people willing to pay for a comparable house in a comparable location?
• The advantage: It is fast, cost-effective, and reflects the current market sentiment. In urban areas or conurbations, this is the most precise valuation method for single-family homes .
• The disadvantage: For extremely specialized properties (e.g., a collector's item in the forest without comparative data), this valuation method for single-family homes reaches its limits, as the computer cannot find any "twins".

The technical perspective: The real value method (asset value method)

Sometimes it's not the market that matters, but the stone itself. The real value method is the traditional valuation method for single-family homes , which dominated before the computer age.

• The principle: You add the land value (land price) and the current value of the building (new construction costs minus depreciation due to age).
• When it is used: This valuation method for single-family homes is ideal for insurance purposes (replacement value) or for very special architect-designed houses for which there is no comparable market.
• The problem: This valuation method for single-family homes often ignores the location's quality in terms of demand. You could build a villa out of gold in an unattractive area. The real value would be high (expensive materials), but nobody would pay that price. Therefore, this valuation method for single-family homes often leads to values that deviate from the achievable market price.

The investor's perspective: The earnings value method

This method is mentioned here only for the sake of completeness, as it is usually unsuitable as a valuation method for single-family homes .

• The principle: The value is derived from the rental income (yield).
• Why it's unsuitable: A detached house doesn't generate a return on investment as long as you live in it yourself. Applying this valuation method for detached houses would often result in a far too low value, since buyers pay "enthusiast prices" for homes that would never be recouped through rent. This valuation method only becomes relevant if you intend to rent out the house.

Decision matrix: When to use which valuation method for a single-family home?

Choosing the right valuation method for a single-family home depends heavily on your property and your goal.

1. The classic terraced house or detached single-family home

The matter is clear here. The hedonic valuation method for single -family homes is the method of choice. Since there are many similar properties, the statistical accuracy is very high (often +/- 5%). Banks rely almost exclusively on this valuation method for single-family homes .

2. The historic farmhouse or luxury one-of-a-kind

Statistics fall short here. For such properties, a combined approach (mixed valuation) is often the best method for valuing a single-family home . An expert calculates the intrinsic value (substance) and attempts to adjust it using market premiums or discounts. A purely computer-based analysis is too imprecise as a valuation method for single-family homes in this case.

3. The renovation project

When a house is dilapidated, often only the land matters. The appropriate valuation method for single-family homes in this case is often the reverse calculation (residual value method): What is the land worth if the old house is demolished ? Here, the classic valuation method for single-family homes merges with a potential analysis.

Sources of error in the single-family home (SFH) valuation method

Regardless of which valuation method you choose for a single-family home, the input data must be correct.

• Mistake 1: Subjectivity. With the hedonic detached house (EFH) valuation method, you have to enter the condition ("good", "average", "poor"). Owners tend to see their house as better than it actually is. This distorts the result of any detached house valuation method .
• Mistake 2: The micro-location. A house on the street is worth less than the identical house 50 meters further back in a quiet area. A good valuation method for single-family homes must absolutely take this micro-location into account.

Modern solutions: heyloft.ch

Previously, you had to choose: an expensive appraiser (real value) or a bank appointment. Today, there are digital solutions that democratize the hedonic valuation method for single-family homes .

heyloft.ch positions itself as a transparent provider.

• The assistant "Loft": heyloft uses the digital assistant "Loft". It makes the complex hedonic valuation method for single-family homes accessible.
• Data quality: Loft accesses the same market data as banks. This means you benefit from the in-depth valuation method for single-family homes , which also determines your mortgage.
• Independence: Loft has no interest in artificially inflating the price (like some real estate agents) or understating it (like some banks). It provides you with the neutral result of the single-family home valuation method .

For owners, this is the easiest way to apply the appropriate valuation method for single-family homes without immediately incurring costs.

Tips for use

When applying a valuation method for a single-family home , please note:

• Purpose: Use the real value for insurance purposes, but the hedonic value for the sale. Do not confuse these results with the single-family home valuation method .
• Up-to-dateness: The market is changing rapidly. A valuation method for single-family homes from two years ago is worthless today.
• Renovations: Have you invested in them? This must be included in the single-family home valuation method. factor it in . But beware: 50,000 francs for a new kitchen rarely increases the value of a single-family home by the full 50,000 francs according to the hedonic valuation method .

Conclusion

The question of the correct valuation method for single-family homes can be clearly answered in 90% of cases: The hedonic method (comparative value method) is the current standard. It best reflects market dynamics, as single-family homes are traded according to supply and demand, not construction costs or rental income. Only for special properties or for insurance-related questions should you use the real value method (asset value) as the valuation method for single-family homes .

It's important that you interpret the results correctly and are honest in your condition assessment. A single-family home valuation method is only as good as the data you feed it.

Loft 's analyses to gain clarity about the value of your home.

Glossary

• Valuation method for single-family homes: A standardized procedure for determining the market value specifically for single-family homes (usually hedonic or real value-based).
• Market value: The price that can be achieved on the market under normal circumstances; the target result of most valuation methods for single-family homes .
• Hedonic method: A statistical valuation method for single-family homes that compares a property with thousands of properties that have been sold.
• Real value (asset value): The result of a valuation method for a single-family home that adds the land value and construction costs minus aging.
• Micro-location: The immediate surroundings (noise, view), which are considered in every modern valuation method for single-family homes. significantly influenced the price.