Selling the Home? How to Assess & Value It


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Valuing a property can be a bit of a movable feast, depending on trends, interest rates and the economy, but some basic guidelines remain the same. Before you go off to valuation specialists and real estate agents to find out what your home is worth, it’s a good idea to do some homework yourself. Do some research on the Internet, find houses comparable to yours in similar locations that have sold recently. To look inside for comparison, see some recently sold listings that have virtual reality tours around and inside the house. Then you will have a better understanding of the valuation process. Here’s some information to help you learn some of the ropes:

What Does Market Value Mean?

When discussing the market value of a property, people usually mention two market assessments: valuation and appraisal.

Appraisals:

If you use a selling agent, an appraisal of what your home is worth is what you will get. Appraisals are indications of the state of the market, based on a few sales that might compare to the house you are selling or buying. Appraisal prices are not valuations and are not an indication of value.

Valuations:

Valuations are figures added up that take into account a comparison of similar sales, the size of rooms and living areas, depreciation since construction (age), land value, renovations or improvements, town planning commentary, garages and parking, outdoor areas, granny flats and also construction costs.

Valuers often find there are very few listed prices that come close to being aligned with the marketplace; instead, sellers begin with a high price hoping it will be successful. Then the asking price is continually adjusted according to buyer interest, or lack of, until someone makes an offer. This way of doing things can be ‘hit and miss’ with only an assessment rather than a valuation as a guide to the ‘real’ or ‘market’ value. These are determined when there is a buyer who is willing and a seller also willing to engage in an arm’s length transaction. The figure agreed upon is reflected in a valuation report.

How the value is calculated

When you apply for a renovation loan or a construction loan against your property or to borrow against your equity, the bank or broker will usually want a valuation which is done through outside companies that are not associated with the lenders. The valuer will assess your property on the following criteria, provided your granny flat is built on a slab and is not a removable construction:

  • The quality of the structure

  • The layout of the floor plan

  • The property’s condition

  • How the property is presented

  • The size of the block

  • The number and size of bedrooms

  • The quality of all fittings and fixtures

  • The size of the living space

  • The size of car spaces and outdoor areas

  • Proximity to the CBD, schools, shops, and transport

The valuer will compare your property against properties sold in the vicinity, including newly-built homes, and will then consider depreciation to bring the value back in line with the present condition of the renovations. While the rental return of the property will be part of a valuation, it will be determined by calculating the construction costs on a rate per square metre. The market value is decided upon by combining the above with the assessed land value and that is then compared with the surrounding sales evidence. Despite any increased yield brought by the granny flat, the valuer can’t take into account the rental return alone, so the value might not increase in any major way.

Author’s Bio

Alex Morrison has worked with a number of real estate agents for over 10 years. In this time he has worked with a range of businesses giving him an in depth understanding of many different industries including health care, real estate and signage.

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