Valuations are an art form – not a science, thats for sure.
At the very most basic a property is worth “that which a buyer is willing to pay, and a vendor is willing to accept”. In other words – the sale price for an ‘on market’ (via a licensed real estate agent) transaction – presumably because this means the general public has had an opportunity to make an offer and yours is the most acceptable to the seller.
Its an interesting exercise when you’re selling a home – you of course believe it’s worth a mint, and the agent does their very best to squeeze every possible dollar out of potential purchasers. At the end of the day you’re either happy with the result or you are not – but nothing more can be done to force someone to pay more than they are willing, regardless of your opinion, or of any ‘valuation’ you may hold.
But what if you’re not buying or selling? How do you know what your home is worth? Or what if you’re buying at auction – how much should you pay, worse – how much is too much?
What often happens is a valuer is given a figure that you estimate the property to be worth – either what you’ve just paid for it (via a contract of sale), what you intend to pay for it (in the auction scenario), or what you think it’s worth by your own research (think refinance or loan variation in this instance). This valuer will then do his or her very best to support the figure you’ve suggested. Less often is a valuer asked to derive a price all of their own.
Valuers have access to the data supplied to land titles office when other neighbouring properties are sold – which often includes the information garnered from real estate listings of same, including photos. This; coupled with visiting your home; helps them come at an average sale figure for like properties in your area – it’s a 4 bedroom, two bath, double garage on 600m2, for example.
What makes this more difficult is unique properties – something that is different to the majority of the homes in the area, for example a small pocket of acreage amongst regular suburban blocks, or where the average is 4 bedrooms and there’s that one place with 6 – what do those extra bedrooms add to the value? What if the market is slower and there are not many properties to compare? What if you have amazing views?
Without personally visiting the majority of the homes on the list they will literally compare as many properties that have similar attributes to yours, in your suburb, that have been sold within the last 3 to 6 months. In this comparison they will add or discard properties; adjust up or down the actual sales figures, in an attempt to justify the price that has been suggested. Thats it. It not any more definite than this. The art is in the experience of the valuer and the time and effort put into the research.
Most of the time they get it right, but there are occasions when its so blatantly wrong and this is where being a broker helps – I can access alternative valuers and other information to either challenge the valuation or simply go elsewhere. So the long and the short of it is, if you don’t get the valuation you need talk to a broker and see if there are other options.
So give your broker a ring, today! Click below, it is that easy!
Mortgage Advice Blog, mortgage broking, Online Financial Management, Online Mortgage Advice, Online Property Advice, Property Advice, Property investing, Property investment Advice, Property Valuations, Rebecca Jarrett-Dalton, Two Red Shoes, Valuations Advice