Where's the value in a property valuation?
When it comes time to selling your property, setting the right price, from the start is critical.
Obviously, under-pricing a home will cost you money, but the same can be said for overpricing a home.
What’s the harm in overpricing a property?
When a property is overpriced:
it sits on the market for too long,
the marketing goes stale,
the images are the same (nothing different here),
newer properties continue to come onto the market and take interest away from your property,
your agent may shift their focus on to newer listings they have.
Eventually, you will be faced with three options:
Drop the price
Re-market (and drop the price) – sometimes with a new agency
Take the property off the market to give it a rest
For those who do decide to sell after a long period on the market, it generally comes at a price - usually selling below market value.
If you don’t do one of the three options above, you may be on the market indefinitely.
Why do properties get overpriced?
There are two common reasons:
1. Potential conflict of interest: high appraisal as a tactic
Agents offer homeowners a free appraisal to help set a price, but the reality is they are also trying to win your listing. There can be a conflict of interest here, as some agents may use a higher appraisal as a tactic to securing your listing.
2. Emotional attachment: The homeowner strongly believes that the property is worth more than it is.
As property owners, we tend to overestimate the value of our homes. It’s called the endowment effect, and studies run since 1970 have proven it time and time again. We tend to overvalue anything that we own and feel strongly connected to.
So - what’s the solution?
To reduce this risk of overpricing (or under-pricing) a property, advice should be sought from an independent and impartial professional.
Using a qualified Property Valuer to inform your price setting process will help keep any conflicts of interest and emotional attachment out of the decisions being made.
Are Property valuations and appraisals - the same thing?
In a nutshell – no.
There are several key differences between an appraisal provided by a real estate agent and a valuation conducted by a qualified property valuer.
Unlike agents, property valuers:
Have professional qualifications and accreditations to conduct valuations: They also have affiliations with bodies such as the Australian Property Institute (API). Through the API, Certified Practising Valuers must meet certain academic criteria, as well as have two-years’ full-time experience in the field.
They are legally responsible for the advice they give.
Gather a range of information and evidence to assess the property. This includes making a physical inspection to the property to assess the condition of the home and additional attributes that are missed online.
Property valuations are used by financial institutions, investment companies and other business professionals when they are participating in a property transaction.
More information on the process that a Property Valuer follows can be found here
What are the extra benefits of a valuation?
Apart from helping determine the right price, a property valuation offers the following benefits:
1. It helps inform your approach and sales strategy before going to market
Understanding the assets and potential issues of your home, you can make good decisions on where you might want to spend money on small improvements (or not).
Being aware of other potential issues with your property (such as having structural issues or being in a flood-prone area), means that you can factor this in to your price.
2. It helps to minimise hiccups during price negotiation/the contract process
Again, being forewarned of any potential issues with the property helps you be on the front-foot during price negotiations with buyers.
Depending on your buyer’s financial situation, it’s important that your property price is in the range of the lender’s valuation. If not, there can be complications during the contract stage.
When preparing your home for sale, a property valuation is one of the steps you should consider. It helps you make good decisions, based on evidence and gives you confidence from the start of the process, all the way through to settlement.