What is the Value of a Property?
An estimate on the value of the property you are selling or buying is essential to be able to arrive at a considerable amount favorable on your end. However, it can be difficult to arrive at an accurate number and real estate agents and online media can be quite conflicting when trying to figure out such information.
The value of your property will also serve as your basis when negotiating with your seller or to someone willing to buy your home. This value is known as the market value. This value may or may not be the listing price or the amount you purchase price of your property.
Determining the Value of Your Home
It would be ideal to hire a valuator to determine the value of your property. However, you can do a little research of your own and determine the minimum and maximum amount you can sell your home or your haggling price when buying a new property.
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1. Check Local Sales
The most common technique in determining the value of your property is by checking out how much house around your neighborhood is being sold. You can begin comparing prices using the following criteria:
Properties within 1km of your property or the property you intend to buy
Properties sold in the last 6 months
Homes or properties similar to yours or the one you plan to purchase
2. Comparing One Property from the Other
To be able to comprehensively compare properties similar to your home for sale or the property you are buying, you should look into the following features:
Location: Determine if the similar property is as close or as far as the property you own or will buy in terms of amenities such as transportation, groceries, business districts, schools, hospitals, and the like.
Size: This shall include the size of the house as well as the size of the land included.
Rooms: Consider the number of bedrooms, bathrooms, car spaces and other similar room features in the homes being compared.
Quality: Do both properties possess similar standards?
You should be able to get the following criteria to determine if the home you are comparing your home to a property that is potential of the same value.
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3. Which is Superior or Inferior?
After collecting a list of 3-5 properties similar to that of yours, then it’s time for you to determine which properties are superior or inferior to your property. Be objective with your comparison. If it seems to be difficult for you to choose, you can ask a friend to rank these properties, including yours from the most superior going below. Be sure to include all the features. An example would be like the one below.
Superior land size with superior accessibility to major necessities but with an inferior house that requires plenty of improvements. Overall, the property is slightly above superior or almost average.
From this comparison, you should be able to arrive at a minimum and maximum value you can attach to your property.
However, banks would value the land and the building separately when evaluating the value of a property.
4. Allow Adjustments for Market Movements
Current trends in the real estate market should also play a big role in the valuation of your property. The trend of the market 3 months ago is no longer applicable and cannot be used to determine the value of your property under the current conditions of the real estate market.
Here is where you need to create small adjustments in the estimated value of your property. Going to open houses and auctions around your area will give you a good feel of the market.
Darin Hindmarsh is the founder and CEO of Intellichoice Finance, a broking firm based in Brisbane. He's been providing financial and broking services in the past 18 years. Hindmarsh is also finalist in the 2020 Australian Mortgage Awards - Pepper Money Broker of the Year – Specialist Lending. To jumpstart your home loan application, visit their home loan online application page today.!