When it comes to both selling and buying a property, knowing the property value is key to achieving a successful sale and/or purchase. As property prices continue to climb upwards, despite COVID-19 lockdowns and restrictions, many homeowners and investors are interested in finding out if their property has grown in value, and buyers are wanting to understand how best to determine a fair and reasonable sale price for prospective properties.
In this article, we explore two of the most common ways to get an indication as to the value of a property – a property appraisal and a property valuation.
Appraisals are mainly conducted to perform a thorough property evaluation and assessment to determine the property’s market value, it’s a less formal estimate of your property carried out by a selling agent, rather than a valuer. Once conducted, an agent will provide an estimate of what the property may sell for, whether that is by a private sale or by auction.
Commonly these appraisals are based on recent sales of similar properties in the location. It can be a bit hit or miss, hence on some occasions, you may see a discrepancy between what it is believed that the property could sell for and what the final sale price actually is. Ultimately, the market will decide the price of your home.
However, by utilising an agent with extensive experience in your local market, you’ll likely receive an accurate property estimate and most agents will provide this service for free. Our buyer’s agents have many years of experience in the Sydney property market and are able to provide property appraisals to our clients on a property’s market value, as well as providing key insights and information on that property. This means negotiations can be conducted with more certainty, and from a stronger position.
A valuation is set up by a Mortgage Broker in accordance with a valuation company, and provides a formal assessment of a property’s value, either to secure a home loan or to refinance a home loan.
A formal property valuation can only be undertaken by a qualified valuer who has undertaken specific education and training. They have a systematic approach and take in all factors that can possibly affect the value, providing a comprehensive, unbiased report on the property’s value. A property valuation is generally completed within 2-3 business days and comes at a cost.
What is the difference between an appraisal and a valuation?
The biggest difference is that a valuation is used as part of a legally binding contract, which means that it is an accurate reflection of the property’s value, rather than a broad estimation of what the property could sell for.
Therefore, property valuers are more likely to base their assessment on the facts regarding the property and are not swayed by emotions. It is important to note that the results of an appraisal and a valuation will inevitably come up with different results.
Valuations are considered more conservative than appraisals, as the banks are concerned with how the property can serve as security for a mortgage rather than what can be paid for a property. It is therefore essential to always be informed of key factors which are driving a location or market, and the key fundamentals behind this instead of relying on being driven by a sale price or using a valuation as the only benchmarks.
How do you stay updated as a homeowner and/or investor?
When looking to stay up to date with the performance of a property, there are two factors to take into consideration:
- The rental yield of the property. The rental yield is a percentage of the price, and therefore the valuation price.
- The capital growth of the property. Capital growth is the rise in the value of the property itself and is often seen as the catalyst for future wealth.
What about adding something about: Another way to stay up to date about the value of your property or properties you are searching for, is to research the sale price of similar properties in your area. By browsing the “Sold Properties” section for your suburb on online real-estate platforms like Domain.com, you will get an idea of how much similar homes have recently sold in your area.
Both property appraisals and valuations have a role to play and are important when identifying the potential growth and cash flow of a property. Understanding property value is important for many reasons, not least when devising a strategy that aligns with your property goals, whether that be for a purchase or sale.
If you need help appraising and/or evaluating a property we can help. Our buyer’s agents are experienced in buying and selling property and have helped many clients to secure their dream homes at the best price possible. If you have any questions or want to know more about how we can help find and secure your new home, contact us for an obligation-free consultation today.
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Purple Avenue is a Sydney based Buyers Agency. We provide objective guidance, market intelligence and advice to help you make the most informed decisions, and our buyer’s agents will be with you every step of the way to ensure the process of buying your home is as smooth and stress-free as possible.
About the Author:
Marcus Feasey is a Buyer’s Agent at Purple Avenue Buyers Agency. An extensive career in residential finance has provided Marcus with an intimate understanding of the purchase process, coupled with his knowledge and experience in the real estate market means that his skillset goes beyond just the property acquisition itself. His experience in the industry includes a variety of roles in sales & distribution leadership, business development and relationship management. Marcus is based on the Northern Beaches of Sydney and currently helps clients purchasing property in the Northern Beaches, North Shore, Eastern Suburbs and Inner-West.
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Disclaimer: This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information. This article is not to be used in place of professional advice, whether business, health or financial.