When you plan to purchase a house, it’s important to understand the value of property accurately. However, it’s not always an easy task. When you try to find the accurate numbers, there can be a lot of conflicting information available in the market. The media may give you a completely different set of figures, whereas, real estate agents might tell you a different story behind each estimate.
First of all, to be able to get a better understanding of how to value a property, you must be aware of the concept of ‘market value’.
Here’s a quick and simple guide that will help you find out how to value a property and make the right decision.
Compare Your Desired Property with Recently Sold Properties of the Similar Nature
First thing’s first, the most simple and straightforward method to value a property is to compare it with recently sold properties of a similar nature in the same area. The following are the key attributes you should consider for comparison purpose:
- The properties should be similar;
- They are sold within the last 180 days, and
- They are within the vicinity of 1 kilometer of the property you intend to purchase.
In addition to that, keep the following factors in mind when doing the comparison:
- Quality – Make sure that you are comparing your property with the properties that are built on the same standards
- Number of rooms – The properties should contain the same number of car parking areas, bathrooms, and rooms.
- Size of Land – The size of the lands on which the properties are built should be the same as the size of your land.
- Location – They are located at almost the same distance from facilities and amenities and the residential area has the same look and feel.
Although it may be a little hard to find all this information, it is absolutely critical to do so if you want to figure out the correct valuation.
Categorise the Properties as Inferior and Superior
Once you find at least 3 or 4 properties that are similar to your property, the next step is to figure out which one is inferior and which one is superior. However, try to be objective in your decision. As discussed, there are a number of factors you should keep in mind, such as views, parking, living area, land size, location, and standard of finishes when ranking the properties.
Valuers assigned by the lenders normally look at the building and land separately when finding the value of a property.
Observe the Market
It’s important to observe the market as it helps you understand its dynamics. For example, if you are in a hot market, 3-month-old information will not be valid for comparison, and won’t give you accurate figures; you’ll have to make small adjustments to get to the right value.
Go to different house inspections and auctions. This will give you a clear idea about the basis on which property prices are determined and how much a property in a particular area costs.
Common Mistakes When You Value a Property
There are so many common mistakes people make when valuing a property, we’ve compiled them below:
- Being led under the Wrong Influence of Agents – Don’t get influenced by the real estate agents. Their main purpose is to sell the property and they will try their best to do so by only sharing a part of the whole truth. Gather information from various sources and don’t just rely on the agent.
- Doing the Wrong Comparison – People normally don’t consider the size, location, quality of property when comparing properties, which makes it difficult to value a property accurately. As discussed, make correct comparisons by keeping all the factors in mind.
- Making Emotional Decisions – This is a big NO! Don’t get emotionally attached to the property you want to purchase as you might end up paying a price much higher than the market value.
- Don’t Listen to the Media – The information provided by the media is not reliable. Its main focus is to sell the news. Instead of seeking information through media channels, visit platforms, such as CoreLogic or Residex as they provide real-time information based on actual statistics and facts.
Keeping all these points in mind will help you value a property more accurately and put you in a better position to make a well-informed decision.