A STEP-BY-STEP GUIDE TO A PROPERTY VALUATION

Many might not realise that there is a difference between an official valuation certificate and a real estate agent’s market assessment value of a property. The former usually comes at a cost and is performed by licensed appraisers, while the latter is provided for free and is equally effective for those hoping to sell their home at full market value.

What is a property valuation?

An official valuation and a real estate agent’s market assessment both provide an indication of the property’s value based on the location, its condition, and multiple other factors (which we’ll delve into further in the next few paragraphs). The difference is that a property valuation can technically only be conducted by licensed appraisers. Some, but not all, real estate agents are licensed to provide an official valuation. But, all licensed real estate professionals will have the requisite expertise and access to information to provide a fair market assessment of the home’s value.

The guide to getting a property valuation

It is key that you price your home right for the market you are selling in. Hiring the right professional and following their advice should be your number one priority. After that, this is the process you are likely to follow:

1. Provide required documents: If you are working with a licensed appraiser, you will likely need to provide them with a copy of the title deed and your latest municipal account information prior to the property inspection to confirm that the property belongs to you. If you are working with a real estate professional, you simply need to book an appointment for them to conduct the inspection - for safety reasons, they may ask for a copy of your ID prior to the visit just to confirm your identity.
2. Property inspection: The appraiser and/or real estate professional will then come to your property and inspect every inch of it, including possibly taking photographic evidence of the property. We’ll delve further into this in the following paragraph.
3. Valuation report: While real estate professionals will provide a market assessment containing similar details, licensed appraisers will prepare an official valuation report explaining in detail your property value and how it was determined. An official valuation report will consist of:
   • Purpose of the valuation
   • Property being valued
   • Date of valuation
   • Title particulars
   • Details of the property
   • Basis of the valuation
4. Pay the fees: After you have received your valuation report, you will need to pay their fees. However, when selling your home, an agent’s market assessment works just as well as an official valuation certificate — and, they offer you this service for free!

What does a property valuation entail?

A property valuation is usually produced as a thorough report that includes features such as the rates, size of the yard, size of any buildings, and details about the physical construction, and condition of the buildings. This report will also list any immediate issues that may need attention, as well as contain an outline of comparative sales in the area.

The valuer will visit the home and inspect the property from all angles, taking photographs measuring the size of the building, taking note of the number and type of rooms, the dwelling’s age and state of repair, its fixtures and fittings, its design and layout, ease of access, property zoning, and any unique characteristics that could affect the value. Price trends and information from the Deeds Office and Surveyor General are also included in the final calculation.

A real estate professional’s market assessment will contain most of the same information as an official valuation and the agent will follow a very similar process to prepare their report.

The factors that play a role in property values

Find out what drags property values down, what drives them up, and how you can determine what your investment property or home is worth.

• Location: The location of your property is the biggest determining factor in the home’s value. Each suburb has its own maximum and minimum values based on previous sales that will largely dictate the price parameters for future sales. But, these parameters can change if demand for the area changes. The more desirable the location and the higher the demand for the area, the more expensive the homes in that area will become. The most desirable suburbs (and, consequently, where the most expensive homes will be found) are typically located in the most convenient, trendy, beautiful, and/or secure parts of a country.
• Market: Property values are based on the rules of demand versus supply and will constantly change over time in response to external market factors. If demand is greater than supply in a given market, property prices will increase. But, if there are more properties on the market than there are buyers, property prices will drop. When things like interest rates, inflation, and unemployment are on the rise, demand usually drops along with property prices. During periods of economic flourishing, demand usually rises along with property prices.
• Appearance & condition of the home: Finally, the features and condition of the home itself will also determine the home’s value. This includes things such as the state of the roof, the number of bathrooms, and the size of the property. As simple as it sounds, the visual state of the property will also have an effect on the value of the home, as it can make the property more or less desirable to potential buyers.

What are the different types of properties that are evaluated?

There are 3 types of real estate that are evaluated for various reasons, most commonly for the sale of real estate:

1. Residential real estate: This includes both new properties currently under construction and pre-existing properties. Freestanding houses, apartments, townhouses, and duplexes that are used solely for residential purposes all form part of this real estate category.
2. Business real estate: Property zoned for business can include buildings that are used for retail, such as shopping centres, malls, medical and educational buildings, hotels, and offices.
3. Industrial real estate: This type of property includes factories, storage depots, and warehouses. These properties can be used for the production, storage, and distribution of products. Some of these properties could be classified as commercial, this is where zoning comes into play.

What are the different valuation methods?

There are various methods an official appraiser will use during a real estate valuation depending on the purpose of the valuation. To give you an idea of what this entails, below are some of the methods used to arrive at a property’s value:

• Comparison method: The comparison method is most commonly used for those who are selling residential property. The evaluator compares the current market value of properties and plots in that region and uses it to create a comparative market assessment.
• Costs method: In case there are no comparative property prices or valuations available, evaluators will use the costs method for a house valuation. Here, they will analyse the average cost of buying land and building a similar property in that area and use that as a comparison to evaluate the property.
• Profits method: Investors usually use this method to determine how profitable the property can be if they rent it out or lease the property to run a business. The property's value then needs to match or be lower than the potential gross earnings to ensure that the investor takes home profits.
• Residual method: This method is used for properties that are bought with the intention of renovating or making changes to increase the value of the same. Most developmental properties and those bought as investments are valued using the residual method.

Hire an expert real estate agent

Curious to know the market value of your home? Contact the team of professionals at your local RE/MAX office, because nobody sells more real estate than us.