When you're deciding whether to buy a property or not, price is just as important as its features and location.
The market price, or what a property sells for, can be different from both a real estate agent's appraisal and a property valuation.
The property valuation may differ from a real estate agent’s appraisal and the actual purchase price.
The expected market price for a property is the most useful figure to know whether you are a buyer or a seller. Getting a feel for the market price can be done by looking at recent sales nearby, referring to commercially available reports on the suburb and by talking to real estate agents in the area.
Why do you need a valuation?
As part of the mortgage application process, most lenders will ask a certified valuer to prepare a valuation of the property. A new valuation may also be needed when you refinance or apply to access the equity in your home.
The property valuation may differ from a real estate agent's appraisal and the actual purchase price. While the market price is the highest amount a buyer is willing to pay for the property in the current market, the valuation aims to identify the amount a property is likely to exchange for between a willing buyer and a willing seller after appropriate marketing.
How is value determined?
Each property is different and the market varies from day to day, making it impossible to come up with a hard and fast formula for determining a price for a property.
Lenders may directly employ professional valuers to assess a property's worth or, more commonly, they may outsource this work to an external valuer.
There are guidelines that valuers are expected to follow in the methods they use for appraising properties. These are set by the Australian Prudential Regulation Authority. Techniques including computer-based research, kerb-side assessments and reviews of contracts of sale are acceptable.
The valuer will take into account the property's features such as overall property size and number rooms, vehicle access and parking. The building's structure and condition, as well as its quality will be considered. Location and council zoning or planning restrictions will also be factored into the valuation.
The valuer will look at prices achieved by similar properties and current market conditions to come up with a valuation for the property.
The process is similar to that used by real estate agents making price appraisals. The main difference is that real estate agents typically assume the vendor will wait and negotiate to reach the optimal price for a property whereas a valuer will be looking for the amount based on negotiation between a willing buyer and a willing seller.