How much is your home actually worth? If you want an independent view of its market value, you should consider engaging a qualified valuer – but precisely what will they look for when they inspect your home?
Professional property valuers will look for certain things when ascertaining the value of your home, explains property and finance expert Peter Boehm, a leading Yahoo Finance columnist.
It’s their job to estimate the price that you could realistically achieve if the property was given reasonable marketing, was looking to be sold within 90 days, and was sold in an arms-length transaction between a willing buyer and a willing seller.
"Valuations are professional opinions based as much on art as on science, because they take into consideration both tangible and intangible aspects of a property, including its surrounds," Boehm explains.
"A full and comprehensive valuation starts with an internal and external inspection of the property. It normally takes around 48 hours for a standard three-page report to be produced, and these vary in price, depending on the property type and the report format requested. For an average sized property, costs usually start at around $300 plus GST."
And exactly what does a property valuer look for?
According to Boehm, the key attributes that they will review include:
- Architectural style
- Aspect, topography and layout of the block
- Land size
- Location in relation to schools, public transport, shops and amenities
- Number of rooms including bedrooms, bathrooms and the size of the kitchen
- Renovation and/or development potential
- Size and layout of the residence
There are two main methods valuers use to value your property, Boehm adds.
"The first, the direct comparison method, looks at researching recent sales of similar properties within the last six months, and comparing and contrasting those properties with your property," he says.
"The comparison properties thereby act as a valuation guide, enabling the valuer to compare like with like and to make adjustments if there are any material differences between the properties."
The second, the summation method, comprises adding the value of the land to the value of the improvements on the land, which include things like the house, pool, garage and pergola.
"Land value takes into account things like its size, shape, location, topography and surrounding infrastructure and amendments," Boehm says. "The value of the improvements is determined by taking into account things like age, style, architectural features, room numbers, renovations and overall appearance."
Professional valuers such as WBP Property Group generally use a combination of these two methods to determine a valuation range, and then use their skills and experience to come up with their valuation figure.
If you obtain a valuation on a property you’re planning to buy, it can help determine your upper limit when making an offer or bidding at auction.
"Normally the valuation will come in around the purchase price – after all, that’s what the market is willing to pay," Boehm says. "But there could be times when it comes in under or over, meaning you may have paid too much or got yourself a bargain."
This article was originally written in November 2011 and was updated for clarity and formatting June 2018