Maximising the value of your property before a sale is a crucial aspect of real estate. We have created a comprehensive guide to property valuation. This guide covers the significance of accurately valuing your property, the factors impacting its value, and practical methods for determining your property’s worth.
What is a property valuation?
A property valuation is a comprehensive, legally-binding assessment of your property’s market value. This report provides in-depth insights into current market conditions and serves as a crucial tool for determining the accurate selling price of your property. By obtaining a property valuation before listing your house for sale, you can be confident that you are making informed decisions and maximising the potential value of your property.
A qualified valuer uses three main methods to determine the property’s estimated value:
- The comparison method is the most common and involves them directly comparing your house with similar properties in your area. They use this information to establish a foundation value and then make adjustments based on the differences between your property and its counterparts.
- The summation method focuses on sales comparisons and the replacement cost and depreciation of a property compared to similar buildings.
- Capitalisation, or the income-based method, determines the property’s value based on its ability to produce income. This method is typically used for commercial and industrial buildings and investment properties.
Valuations can be used for property settlement, dispute resolution, home loan approvals, taxation compliance (like capital gains valuations) and establishing the value of deceased estate settlements.
However, it’s important to remember that while the valuation may determine the estimated value, the final sale price may differ. This depends on circumstances like a competitive auction or market conditions.
What’s the difference between a property appraisal and a property valuation?
The main difference between a market or property appraisal and a property valuation is that a formally qualified valuer completes the valuation and is a legally binding report. A property appraisal is a free service by a local real estate agent. It’s an informed judgement; however it has no legal standing.
Why is a property value estimate important?
Property value estimates are beneficial for both buyers and sellers.
For Buyers
A professional valuation reduces the risk of buyers purchasing a property for more than its market value. This is particularly important in private sales. However, the most common reason a buyer gets a valuation? Because their bank says so! Home loan lenders need to be confident that they can recover any outstanding balance should the worst happen and a client defaults on their mortgage.
For Sellers
A professional valuation is beneficial to sellers for a few reasons. Firstly, it gives property owners an estimated selling price according to the local property market. That way, you can determine whether to sell now or wait. Secondly, it identifies areas where you can make improvements and add value. Finally, it can also help you assess your property’s major selling points to highlight them when it hits the market.
What factors affect property value?
A valuer considers a lot of details before determining a property’s estimated value:
- Property data, including the building size, the floor plan (the number of bedrooms and bathrooms), its condition, street appeal, structure, fixtures, fittings and exterior. They’ll also want to know whether fixtures like blinds and decorative lights are included in the sale price.
- The location and how accessible the property is to essential amenities such as schools, public transport and shopping centres.
- Property information like the ease of access.
- The local council, zoning or planning restrictions. This includes upcoming construction projects and environmental risks.
- Current local market conditions and recent sales data to compare your house to similar properties in the immediate area. The closer your property matches its counterparts, the more accurate the appraisal.
- Wider real estate market trends and forecasts.
- The time of year you’re hoping to sell the property. The direction of the market (whether values are going up or down) will also affect the estimated value.
- The current economic environment, which includes interest rate rises.
What is included in a valuer’s report?
Once they take into consideration the above details, here’s what you should find in the professional valuer’s report:
- A summary of their findings, including the estimated property value.
- A certificate of title
- The property’s location
- A site description
- Town planning information that includes environmental concerns.
- Photographs
- Their comments, including suggested improvements.
- An analysis of their final valuation, including rationale and market insights as evidence.
- Their qualifications and disclaimers.
How do I determine the right property value?
Here’s how you can determine the right property estimate:
Hire a professional valuer
As mentioned, you can pay a qualified valuer to perform a valuation, which is a legally-binding document. The exact cost depends on the property size and value but is usually between $300 and $600. Most valuers will provide property owners with a three-page report within two or three days. A quick Google search will help you find a local property valuer. However, ensure they’re registered as a Certified Practising Valuer (CPV) and are a member of the Australian Property Institute.
Alternatively, you can work with an agent and receive a free property appraisal. Using a local agent can be beneficial as they have market insights and can advise you on what local buyers are looking for and therefore how you can add value to your property. They can also share whether it’s a good time to sell based on the current climate, which truly is priceless information.
You can compare agents and book an appraisal with LocalAgentFinder.
Use online tools to determine property values
If you want a good starting point to determine your estimated property value, use our free online valuation tool. We take into account recent sales (and their distance from your property address), as well as property data like features, type and condition to give you an automated valuation model estimate (AVM estimate).
We then provide you with our confidence score for selling within this estimated value range and a report featuring real estate statistics and a full history of recent sales in your suburb (over 12 months). This includes median sale price, rental history, the number and type of properties sold and the average days on the market.
However, remember this is just an estimate, which may differ from the professional valuation for a few reasons. Firstly, there might not be enough supporting data, especially if the property is unique or there’s a lack of other properties recently sold in your suburb. This is particularly important if you reside in a newly established suburb. There might also be data points missing online, like the property size or floor plan.
To try our free online property valuation tool today, click here.
Conduct a self-assessment
The best way to do a self-assessment of your property’s value is to do an online property search and focus on what’s recently sold in your suburb. Gather all available data and analyse the median sale price of similar properties in your local area to determine an estimated value. You can also attend local auctions to gauge buyer interest and price estimates.
How do I prepare for a valuation?
Here are some tips for preparing for a valuation:
- Ensure your home is clean and tidy, and remove any unnecessary clutter.
- Make the first impression count and invest in your property’s curb appeal. This includes everything from landscaping, maintaining garden beds, mowing the lawn, cleaning exterior walls and updating the front door.
- Make sure everything is in working order and complete any minor repairs, such as broken light fixtures or leaking faucets. Minor updates like polishing floorboards, updating tapware and painting tired doors can also instantly add value to your house.
- If you’ve completed any major renovations since owning the property, have invoices or other documentation handy to show the valuer. This important information will likely increase your home’s value.