Property Valuation Tips

The importance of property valuation for property buyers and sellers cannot be overemphasised. Valuation is the bedrock upon which the price of your property is determined. Therefore, it is important to ensure that a professional house valuer does your property valuation.

housevaluation_761Generally, a house valuer will give arrive at the price of property after taking a number of factors into consideration. As such, you can influence the value of your property by taking into consideration a number of factors. Here are some effective and useful property valuation tips to consider:

  • Ensure the property is in good condition – The face value of your property determines to a large extent whether your house will have a high value or not. First impressions count a great deal. Therefore, make sure your property is in a good condition. No buyer would be interested in investing in property that has been run down and stripped of its aesthetic value.
  • Consider the space available – Most buyers are attracted to property that is spacious. Thus, you will do well to take time to ensure that your create space so that the buyer can see the property from the perspective of their need for space. Ultimately, space is a major contributor to the value of property. Thus, the more space your property offers both indoors and outdoors, the more it will fetch on the property market.
  • Remember the value of improvements – If you have made any significant improvements to the property, be sure to let have it considered during valuation. This way, the cost of the improvements can be factored in to the overall value of the property.
  • Pay attention to the kitchen and bathroom – Although the number of bedrooms can significantly affect the value of your property, most prospective buyers are interested in the kitchen and bathroom. For instance, if the house has two floors, then it should at least have three to four bathrooms and two kitchens. If the property does not offer this then chances are the value will decrease.
  • Consider both outdoors and indoors – While most property owners pay attention to the interior of the property, it is paramount that the exterior be equally seen as being important. This is because they both influence the overall value of your property. Thus, invest in creating an amazing kerb appeal while also being sure to fix any broken fixtures, create space and tidy up the interior.
  • Have a flexible margin – many times, property owners forget to take into account the margin for haggling. The truth is that the buyer determines the value of your property. Therefore, you need to have a flexible margin to accommodate the difference deducted from the initial amount as a result of haggling. Remember, not all property is sold for the price that is initially put out by the owner.

Property valuation serves as an indicator of the much you should expect to sell your property for to prospective buyers. Even then, the ultimate value is what the property will be sold for. Therefore, you will do well to consider all the important factors to ensure you do not sell your investment at a loss.

Property Valuation Methods

When you are looking to sell your property, you need to first determine how much it is worth to be able to come up with a realistic asking and selling price. Generally, property surveyors are tasked with establishing the market value of property especially if you are going to present it to the bank or financial institutions.

housevaluation_399In most cases, the surveyor acts on behalf of a third party, usually a mortgage lender or the person that you are selling to that are keen on getting a valuation that is realistic. Consequently, lenders do not want to lend you against property that is not worth the money they are giving you.

Methods of Property Valuation

The five methods that are used to determine the value of property are as follows:

  • Investment method – This method of property valuation employs discounted cash flow techniques to determine the value of property based on the income producing nature of the asset. This method is common when valuing commercial property.
  • Comparative method – Here, you will compare the value of your property against similar properties within your locality. This is usually convenient when dealing with residential investors.
  • Residual method – This method is used in establishing the value of development sites. That is, the value of property is arrived at by taking into account the cost of developing land and the final gross development value.
  • Replacement cost method – This method is applicable to buildings that have little comparable evidence like schools and churches among others. The cost of rebuilding the structure and the cost of the land are the basis of property valuation.
  • Profits method – This is mostly used for valuing commercial premises like cinemas and hotels among others.

Property valuation gives you a window into what you should expect when you are selling your property. Ultimately, the estimated amount for which you can sell property will be based on the amount the buyer is willing to pay at the time of transaction.

Property Valuation: What you need to Know

If you are considering selling your property, you need to begin by assessing its value. You can then come up with a reasonable asking price and market price based on the valuation. Although estate agents may do property valuation, they are not mandated by law to do it.

It is important to realize that property valuation goes beyond the estate agent telling you that they can sell your property for much more than most of the property in your area is selling.

It involves appraising the property to ascertain its value. This is a complex engagement as it involves a number of factors.

The Role of Estate Agents in Property Valuation

Chartered surveyors are mandated by law to conduct property valuations. Thus, there is a misconception that estate agents can carry out valuation for you.

Estate agents often make estimates of the value of your property even though the estimates they provide cannot be relied upon as being accurate and objective.

In some instances, estate agents may recommend asking prices that are over inflated with the aim of pleasing the seller to win business. On the other hand, they may also push the client to accept prices that are below the general market price with the only goal being securing a quick sale that will translate to a high turnover that is more profitable.

Since you cannot be sure of the motives of estate agents, you may as well consider performing an independent valuation.

housevaluation_864Does a Do-It-Yourself Valuation Count?

Apart from the valuations done by estate agents and professional surveyors, it is possible for you to do your own property valuation.

Although the methodology and theory of valuation is not commonplace, there is some literature on the different methods that you can use to determine how much your property is worth.

Generally, there are three theoretical approaches to property valuation namely income approach, the cost approach and the comparable sales method. Even then, it is the income approach and the comparable sales method that are given more weight.

The comparable sales method emphasizes on the actual market data while the income approach looks into the profitability of the investment. These two methods of valuation complement each other hence, a diligent valuation should use both.

Value vs. Price

The appraisal methods discussed above offer theoretical approaches to the issue of value by helping to estimate your property’s worth in line with the overall market trends as well as personal investment.

Even then, in reality you will operate in a free market that is dictated by the forces of demand and supply that determine the amount of money that the property will be sold for. It is important to keep in mind that there may be a substantial gap between the fluctuations of the free market and the subjective valuations. Consequently, the subjective value of the property will not correspond with the actual price. On the other hand, you cannot scientifically predict the forces of demand and supply.

Ultimately, the value of property is subjective than it is objective. For instance, if a buyer prefers a detached house with a garden in the countryside, then your three bed roomed apartment within central London is not of much value to him.

In addition, small features such as the size of doors are worth less or more for different people. Overall, the forces that influence the value of property include the features, location, proximity to social institutions within the area, tax codes, wage levels, environmental legislation and building zones among others. Property valuation serves as a guide for property owners to determine the range, which they can sell their property.

Demystifying Property Valuation

housevaluation_8Property valuation may seem complex and confusing especially if you are not trained in this area. In fact, it is generally assumed that property valuation is a preserve of surveyors and property experts dealing in residential and commercial property. However, as a property seller you need to understand what valuation entails so that you know what you are giving up your property for.

  • What is property valuation?

The best place to begin is by understanding what valuation is all about. In simple terms, property valuation involves carrying out an assessment of a site or building with the view of determining its monetary worth at that particular time. The figure quoted is based on a number of assumptions as well as the prevailing market conditions and various factors that have an effect on the projected market, capital and the rental value.

  • Why the difference in valuation figures differ?

It is not unusual for different property surveyors to quote a different value for the same property. This is because valuation is not a science rather an opinion that is based on evidence from the comparison of appropriate market data that relates to the sale of related property within the area.

This is usually combined with a detailed inspection of the property to assess any unique characteristics that add up to the value of property. Thus, the surveyor inspects all the rooms as well as other buildings within the surroundings.

In particular, detailed measurements, photographs and notes are taken are referred to when drawing a conclusion of the value of the property in the report. As an issue that is opinion based, there is also an element of subjectivity.

Even then, valuation figures from multiple professionals should fall within a close range of the formal valuations conducted out by valuers who are  registered with the Royal Institution of Chartered Surveyors (RICS) that are governed by a strict set of procedures and rules.

  • Why is the sale price different from the valuation figure?

Although property valuation is crucial when selling or buying property, the estimations of the worth of property do not translate to the sale price. Hence, you are likely to sell or buy property at a different price from the one derived during valuation.

It is also important to keep in mind that some valuations have unrealistic estimations of the worth of property especially those that are generated by estate agents. In fact, many buyers that rely on estate agent valuations get disappointed when the formal valuation that they need to secure a mortgage falls short of the price they are prepared to pay for the property.

Remember, for valuations that are done for the purposes of lending the valuer is determined to please the lender as well as give an assurance that the loan being requested against property corresponds to the value of the property.

This way, financial institutions are safeguarded from lending beyond the sale value of property should there be need to recover outstanding loans or the borrower has defaulted on repayment.

Estate agents usually carry out an appraisal of property before putting it on the market. While this gives an idea of the possible amount a buyer may be willing to pay at the time, it cannot be taken for the actual worth of the property.

In fact, property appraisals done by estate agents are not valuations hence unsuitable for the lender loan security assessment that require a formal valuation report from valuer who is registered with RICS as they take into account both comparable market evidence and the features of the property in detail.

Moreover, the sale prices of property may be swayed by other factors that include personal preferences, market demand as well as the emotions of the buyer. Thus, the buyer may be willing to pay more than the asking price for a dream property that is in a perfect location.

Thus, estate agent appraisals and sale prices may not be representative of the actual value of property and cannot be depended upon by the buyer, seller or even lender when judging the actual value of property.

  • Why should you use a registered RICS valuer?

Have you ever wondered why there is a lot of emphasis on the use of a RICS registered valuer. Well, valuers that are governed by the Royal Institution of Chartered Surveyors are guided by strict guidelines that include providing professional indemnity insurance as well as being able to defend the market evidence in the report to attain the end valuation.

Thus, you can rest easy knowing that you can rely on the opinion of value for a given property subject to qualifications in the valuation report.

Overall, sellers, lenders, purchases as well as insurers may instruct independent valuer that is registered with RICS with confidence of receiving a valuation that is reliable, accurate and honest.