After executing repairs and undergoing inspection, the next valuable step home sellers need to take is property valuation. It may sound like another expensive feat. However, this is essential if you want to make the most out of your property and become a self-made real estate success.
Property valuation varies from one area to the next. That’s why today, we’re going to let you in on some of its fundamentals. Along the way, we’re going to answer questions you may have concerning the topic.
WHAT IS A PROPERTY VALUATION?
Property valuation is a form of appraisal conducted on a property by interested parties in order to accurately assess its real value. It is not only the house itself that directly affects its market value. There are other factors that contribute to a property’s value, which we will discuss later on.
Getting a property valuation benefits you in more ways than one. Other than having access to the equity of your home, a property’s value can be a security against home loans. Moreover, valuation helps in making decisions when buying new property. Most of the time, a property valuation is required when applying for mortgages.
With some real estate agents inaccurately valuing homes from one area to the next, a thorough valuation provides a more specific, fact-driven value that could be very helpful for home sellers.
FACTORS AFFECTING PROPERTY VALUE
Just as we previously mentioned, there are other factors that can affect your home’s actual value other than its current physical state. Other attributes you need to take into account include:
- Location of property
- Size of the property and the land it’s standing on
- Property appreciation rates
- Vehicle access
- Local council zoning
- Planning restrictions
- Current value of surrounding homes
- Current market demand
- Undergoing construction developments in the area
MANUAL VS PROFESSIONAL VALUATION
Other home sellers who prefer not to have real estate agents work with them often end up manually conducting property valuation on their own. The absence of real estate agents has its perks as well. However, conducting a manual valuation may not be as advisable as having a professional valuer come and assess your home.
It takes tremendous amount of knowledge and experience for one to personally assess their property. Biases may also arise, which can altogether negatively affect an objective valuation report. Also majority of the time, buyers hire their own valuer just as they would with inspectors. A poor, inexperienced valuation may lead these buyers to believe they are paying more than the correct price.
On the other hand, professional valuers may have a better shot at appraising your property more objectively. Typically, interested parties (including you as a seller) hire a valuer to visit the property. They will assess the various features of the house, including the factors we mentioned above, and more. In the process, they will also take pictures and highlight a property’s finer features. The difference between valuers and real estate agents is that the former are legally responsible for the value they come up with.
3 COMMON PROPERTY VALUATION TECHNIQUES
There are three common valuation techniques you need to be aware of. Here they are:
COMPARABLE SALES METHOD
Also referred to as Inferred Analysis, Comparable Sales Method produces property value based on similar properties being sold within the same area. This technique is comprised mainly of the current market conditions as well as activities within the location.
The Income Method produces a property value based on the intrinsic value of a house to someone. Whether it’s considered to be let or to be sold for a resale value, this method assesses the potential income of investment for future reference.
Compared to the other two methods, Cost Approach focuses on understanding the total cost of certain components, like the house itself as well as the land it is standing on. The principle is applied on calculating the value of the land without the property, prioritizing cost of reconstruction.
Among the three methods, the most common is a combination of Income and Comparable Sales.
INCREASING YOUR PROPERTY VALUE
Now that you have a better idea about property valuation, it’s time to learn how to effectively increase your home’s appraisal value.
Here are some of our tried-and-tested tips:
- Invest on as many renovations as you reasonably can. If you are working on a tight budget, even mini makeovers such as replacing fixtures, patching small damages or repainting the house make a huge difference.
- Work on how the property presents itself from the outside. Mow your lawn, make room for better car access and remove any untidy-looking trees that could be obscuring a beautiful view.
- Take a look around your neighborhood. Compare your home with other properties currently being sold in the market. From here, think of the ways you can develop an edge above others.
Property valuation shouldn’t be something you’re intimidated about. It’s all about being knowledgeable and taking the time to prepare for what’s to come.