You’ve had your property appraised by a real estate agent, and you’re thrilled with their selling estimate – until your valuation report comes back, and it’s $70,000 lower than the agent quoted. What is the actual value of your property?
It’s an issue that real estate agents deal with on a daily basis, says Michael Brock, president of the Real Estate Institute of SA (REISA), as many people don’t understand that there is a difference between a valuation and appraisal.
Brock says that formal valuations are only possible when the valuer has had the necessary education and training. This ensures they are able to address all aspects of a property.
“Valuing can be a tedious task and can take a lot time.
A registered valuer will do a professional formal valuation. This takes into account many property features like:
- Building structure and condition
- Any structural/building defects
- Home features
- Caveats and encumbrances to your property
- Zoning by the local authority
You can expect to pay $3 to $500 for a professional valuation. A written report will be provided detailing the reasons and how it was valued.
What’s the purpose of a valuation
Valuations are required in situations where a value determination may be necessary. Brock says this is necessary in order to settle a property, obtain financing from a lending institution, or establish the estate’s value. A court can also order that a valuation of the property be obtained to settle a dispute.
Appraisals should only be used to guide the buyer and not as an indication of who is selling.
Brock says that appraisals are based upon knowledge of the area as well as recent sales prices. They should not be used to estimate the price.
They are not final and don’t have legal standing. It is rare to charge a fee for appraisals and they are generally only requested by potential vendors to get a ‘feel’ for the local market.”
What are the benefits to an appraisal?
If you’re planning to sell your home or investment property, an appraisal from one or more qualified real estate agents can provide you with an indication of what your property is likely to sell for.
It is crucial to only contact local agents. A local agent may not have the same knowledge of micro-markets as an agent who has worked elsewhere. You might get a higher or lower appraisal than the market will bear.
Margaret, a Gold Coast homeowner decided to downsize after her children moved out and was an excellent example.
“The first agent we had was from Surfers Paradise, and he admitted that he didn’t know the area very well,” she says. It was appraised at $475,000 to $550,000, which was lower than we expected. The house next door sold for $540,000 a few weeks ago, and it’s almost identical to ours – except, we have a pool!”
Her agent contacted two agents in Benowa who were experts in Benowa property. They appraised the property and charged $580,000 each.
“If we decide to sell, we’ll definitely work with an agent who is familiar with our local area,” Margaret adds.
This story was originally written in October 2010. It was formatted by June 2018.