One of the key things you will want to establish early on in the process of selling your property is how much your current home is worth. This can be done one of two ways; through your estate agent or by hiring a professional valuer to value your asset.
Market Valuation – Estate Agent vs. Valuer
An estate agent, through their market knowledge, can provide you with an appraisal of your property which is a guide of the market value. Given the agent is specialized in a local area of the market, their knowledge and expertise will deliver a strong indication of the likely sale price for your property.
On the other hand, a valuer is legally qualified to provide a formal ‘valuation’ of the property. A valuation report, which is prepared by a valuer, is a professional and legal assessment of the value of your property prepared for many different purposes, including for the sale or pre purchase of a property.
Engaging a valuer will add additional cost to the sales process, however, as an independent and unbiased view of the market it may provide you with peace of mind that the property is being priced at market rate.
A Professional Valuation
If you have made the decision to commission a formal valuation for your property it is then important to understand the process the valuer will go through to value your property.
Types of Valuation
A valuer may use one of several methods to value your property:
1. Direct Comparison Method
The direct comparison method compares the property with the recent sales of similar properties that have been sold in the area. These sales then act as a guide to assist in determining the market value of your property.
2. Summation Method
The summation method is the process of determining the value of the land (its size, shape, location, surrounding infrastructure and changes), and then adding the value of improvements on the land (age, style, architectural features, number of rooms, renovations, etc).
3. Capitalisation Method
The capitalisation approach involves applying an investment yield to the property to work out the rental income, which is then discounted to determine the market value. This method tends to be more commonly used with investment properties.
The Valuation Process
Before the Inspection
A valuer requires instructions in writing requesting a valuation, which specifies the purpose of the valuation along with an agreement to the valuer’s terms and conditions.
A valuer will then proceed to make an appointment to inspect the property. Before the valuer arrives, ensure the following documents are on hand:
- Contract of Sale
- Certificate of Title
- Plan of Subdivision
- Building Plans (if new)
- List of any work(s) undertaken
- Rates of Notice
- Provide Owner’s Estimate of Market Value (OEMV) but ensure you are realistic
- Local papers and newspaper sales results
- Obtain some evidence from local real estate agents
- Obtain a ‘market appraisal’ from a local real estate agent
During the Inspection
A valuer will look through the property both internally and externally and will take notes of key factors which influence the final valuation, such as:
- Measurements of the dwellings and land
After the Inspection
In addition to inspecting the target property, a valuer will also consider its surroundings; both proximity to key points of interest (schools, public transport, etc) and the neighbourhood.
On this basis the valuer will then prepare a report which will take all of the information into consideration. This detailed report will include the following information:
- Title Details
- Location Description
- Site Description
- Building Description (after an inspection has occurred, this will include detailed description of accommodation, features, living areas, etc.)
- Comparable Sales
- Valuation Figure
- Photographs of the property
For more information on how to improve the value of your home, please refer to “Maximising the Price of Your Home”.