How to work out a property's market value
When buying or selling a home, there are many decisions you have to face:
When Buying:
When Selling:
Valuing residential property has principally been the domain of registered property valuers.
But what if you want to assess the market value of a property for yourself? How difficult is it for YOU to judge the market value of a residential property?
In my daily work as a property valuer, I have developed a tried and tested method for assessing the market value of residential properties.
This method is based around 5 KEY STEPS and there is no reason why you cannot use a similar process to accurately judge a property's market value yourself.
The 5 key steps are not hard to complete, so long as you are willing to complete a bit of basic investigative work, combined with some simple calculations, and can apply common sense principles and logic.
The steps include:
By using the process above you actually develop a "Feel for the Market"...
and once you have this....you are then in a position of power to negotiate the...
Right Price, First Time!
Every day I see people make poor and uninformed decisions when they buy or sell property. Why do they make poor decisions?
Because they have limited market knowledge, or let somebody else talk them into a deal which ultimately doesn't suit them. The answer is to make yourself a smart buyer or seller using the market information which is out there for the taking.
A smarter buyer will spot the bargain when it becomes available.
The smart seller will know what their property is really worth so they get the best price in the quickest time frame.
In the following I will outline the five steps listed above. Each step is vital in the process to gain a true understanding of market value.
Step 1: Know your subject property
It amazes me how many people buy houses after looking at them only a couple of times. Usually those viewings are pretty short and nearly always accompanied by a bright eyed real estate agent who is gushing with superlatives about the property.
Hey, don't get me wrong here. I totally agree that a lot of home ownership is tied in with emotions. So it should be. Who wants to live in a four walled box that they have no emotional connection with?
The problem is that many people get so overwhelmed by the emotional pull, aided by the gushing real estate agent, that they forget to check the really vital details - like how well maintained the property is, what's over the fence, and will the property get any more sun than an arctic winter.
The first step in assessing what you should be paying and whether you will be proceeding is to do a thorough inspection of the property, both exterior and interior.
I'm not suggesting that this will replace a good building inspection, but you absolutely must at least go around the house, slowly, and take note of any obvious work that needs doing. If the work is obvious to your uneducated eye, you can be almost certain that an inspector will pick up even more detail and work required.
When I say slowly I mean you should spend at least an hour on site - having a really good nosey at everything you can both inside and outside. Hey -open up cupboards, look in wardrobes, stick your head in the attic - it's amazing what you will find - perhaps some dampness, a leaking hot water cylinder, shafts of light beaming through the iron roofing?
Here's a wee hint. As a valuer I measure the exterior of the property to check the floor area. You should do this too. The rating value floor areas are notorious for being incorrect - and a lot of the rating value is based on how big they think the property is.
The other reason for measuring is that it gives you the time to go methodically around the property perimeter - having a good gander at weatherboards, windows, foundation walls, and anything else that might throw up a few queries.
Step 2: Gather Sales Information
A key to making yourself a smart buyer or seller, is having access to property sale information in your neighbourhood. Luckily, with the internet, this information is readily available - albeit that there may be a small fee to pay for access to certain sites which hold this information.
The key areas where you can find property sale information include:
The secret of course is that the more you know about what has sold in the neighbourhood, the better a position you are in to negotiate the right price.
Until you have a good handle on what has recently sold in the neighbourhood, and, what condition those properties were in compared to yours, you are effectively in a very weak position to negotiate. The knowledge is power thing was never truer than in real estate.
Ultimately this process involves a bit of good old detective work. Don't let that bother you though. It can actually be quite fun.
Personal contact with buyers and sellers can be very enlightening. People like to have a gossip. A quick conversation with a neighbour can reveal some very crucial information such as how long a property has been on the market, why the owners are selling, and perhaps some not-so-good news about the neighbourhood in general.
Actual sale data can be first downloaded from the net, but it is then vital to actually go and check out those sales to see how they compare with the property you are buying or selling. This is discussed further in the next section:
Step 3: Comparing apples with apples
Coming soon...
When Buying:
- Is the asking price fair and reasonable?
- Is the price a true reflection of the market value?
- Could I have offered too much, or too little?
When Selling:
- Has my property increased in value?
- How much should I sell for?
- Am I asking too much - or too little?
Valuing residential property has principally been the domain of registered property valuers.
But what if you want to assess the market value of a property for yourself? How difficult is it for YOU to judge the market value of a residential property?
In my daily work as a property valuer, I have developed a tried and tested method for assessing the market value of residential properties.
This method is based around 5 KEY STEPS and there is no reason why you cannot use a similar process to accurately judge a property's market value yourself.
The 5 key steps are not hard to complete, so long as you are willing to complete a bit of basic investigative work, combined with some simple calculations, and can apply common sense principles and logic.
The steps include:
- A detailed survey of your subject property.
- An honest assessment of the property's strengths and weaknesses.
- Collection of recent comparable property sales in your neighbourhood.
- A comparison of these properties and their strengths and weaknesses.
- Some simple calculations to reach a value conclusion.
By using the process above you actually develop a "Feel for the Market"...
and once you have this....you are then in a position of power to negotiate the...
Right Price, First Time!
Every day I see people make poor and uninformed decisions when they buy or sell property. Why do they make poor decisions?
Because they have limited market knowledge, or let somebody else talk them into a deal which ultimately doesn't suit them. The answer is to make yourself a smart buyer or seller using the market information which is out there for the taking.
A smarter buyer will spot the bargain when it becomes available.
The smart seller will know what their property is really worth so they get the best price in the quickest time frame.
In the following I will outline the five steps listed above. Each step is vital in the process to gain a true understanding of market value.
Step 1: Know your subject property
It amazes me how many people buy houses after looking at them only a couple of times. Usually those viewings are pretty short and nearly always accompanied by a bright eyed real estate agent who is gushing with superlatives about the property.
Hey, don't get me wrong here. I totally agree that a lot of home ownership is tied in with emotions. So it should be. Who wants to live in a four walled box that they have no emotional connection with?
The problem is that many people get so overwhelmed by the emotional pull, aided by the gushing real estate agent, that they forget to check the really vital details - like how well maintained the property is, what's over the fence, and will the property get any more sun than an arctic winter.
The first step in assessing what you should be paying and whether you will be proceeding is to do a thorough inspection of the property, both exterior and interior.
I'm not suggesting that this will replace a good building inspection, but you absolutely must at least go around the house, slowly, and take note of any obvious work that needs doing. If the work is obvious to your uneducated eye, you can be almost certain that an inspector will pick up even more detail and work required.
When I say slowly I mean you should spend at least an hour on site - having a really good nosey at everything you can both inside and outside. Hey -open up cupboards, look in wardrobes, stick your head in the attic - it's amazing what you will find - perhaps some dampness, a leaking hot water cylinder, shafts of light beaming through the iron roofing?
Here's a wee hint. As a valuer I measure the exterior of the property to check the floor area. You should do this too. The rating value floor areas are notorious for being incorrect - and a lot of the rating value is based on how big they think the property is.
The other reason for measuring is that it gives you the time to go methodically around the property perimeter - having a good gander at weatherboards, windows, foundation walls, and anything else that might throw up a few queries.
Step 2: Gather Sales Information
A key to making yourself a smart buyer or seller, is having access to property sale information in your neighbourhood. Luckily, with the internet, this information is readily available - albeit that there may be a small fee to pay for access to certain sites which hold this information.
The key areas where you can find property sale information include:
- The Quotable Value web site
- The Real Estate Institute of New Zealand
- Property Valuers
- Real Estate Agents/Salespeople
- Personal contact with buyers and sellers
The secret of course is that the more you know about what has sold in the neighbourhood, the better a position you are in to negotiate the right price.
Until you have a good handle on what has recently sold in the neighbourhood, and, what condition those properties were in compared to yours, you are effectively in a very weak position to negotiate. The knowledge is power thing was never truer than in real estate.
Ultimately this process involves a bit of good old detective work. Don't let that bother you though. It can actually be quite fun.
Personal contact with buyers and sellers can be very enlightening. People like to have a gossip. A quick conversation with a neighbour can reveal some very crucial information such as how long a property has been on the market, why the owners are selling, and perhaps some not-so-good news about the neighbourhood in general.
Actual sale data can be first downloaded from the net, but it is then vital to actually go and check out those sales to see how they compare with the property you are buying or selling. This is discussed further in the next section:
Step 3: Comparing apples with apples
Coming soon...
Next Article: Why Get a Property Valuation?