Understanding Property Appraisals

Whether you are looking to sell or just curious about the value of your home, a property appraisal is a great way to find out what is happening in your local market. It provides a detailed snapshot of recent sales in your neighbourhood at that point in time and is crucial to understanding your true net worth.

A property appraisal will answer some key questions you are likely to have about your property. This important information could be used to decide to renovate or whether it is time to upsize or downsize. It could also help to realise capital in your property that could be used for investing.

When you know the facts about the value of your most important asset – your home – you can make smarter decisions that can positively impact your current and future financial well-being.

There is no right time to sell a property - it really comes down to your own circumstances.

Once you decide to list, there are a number of things to consider, including:

Choosing a real estate agent
Finding how much your property is worth
Picking a method of sale
Setting a selling price
Finalising the contract
Agreeing on a marketing campaign
Preparing your property for inspections
Along with all the steps to complete the sale

But perhaps the most important element to consider from the list above is: how much is your property worth?

Requesting a property appraisal from a licensed real estate will provide this key information. It is also easier to make future plans once you are armed with knowledge about the current market value of your property.

01. What is a property appraisal?

A property appraisal is an estimate of the price of your property if it was to hit the market at the current time. Real estate agents specialise in answering the ‘how much is my home worth’ question, and they do it by running a comparative market analysis which involves finding similar properties that sold usually within the last 90 days.

If you live in a very tightly held area where there have been few sales it can be trickier to work out the value using this method. Agents may expand the comparison search period depending on the level of activity in your suburb as well as market conditions. In a very hot market, house prices can change rapidly. In more stable conditions, it is not unreasonable to include sales results achieved up to 6-12 months ago.

The closer agents are able to match your property to others sold in the area, the more accurate the appraisal will be. The term ‘comparable sales’ is often used and this means looking at the results of properties in your suburb of a similar size with similar features. There is no point analysing what another home fetched if it is fully renovated or sitting on land twice the size of your own.

When a real estate agent conducts a property appraisal there are several things they consider, from property size right through to the fixtures and fittings. If you’ve just added a new kitchen, pool and alfresco dining area, then you will want to know how other homes with the same features have performed in the market.

Agents also consider current competition, wider market trends, the property’s structure and its condition. Property appraisals are an excellent way of understanding your property's potential market value at that point in time.

It’s always advised that you contact a real estate agent from your local area to conduct an appraisal. They live and breathe property in your neighbourhood and have an intimate knowledge of the suburb. This ensures they can give you a more accurate appraisal.

So, let’s look in detail at how the actual value is determined.

Property size

When conducting a property appraisal, the real estate agent will look at the size of the overall block, the size of the structure on the land, as well as the space of the relevant areas within the home. For example, how large is the living area or main bedroom? The agent, however, has to weigh up these measurements against other properties in the area. It’s also crucial to understand the potential buyers or target market.

When looking at property size, the agent will also consider the outdoor areas – whether there is parking, and whether it’s a carport or lock-up garage, as well as the size of the garden and/or terrace/balcony.

Number of bedrooms

Bedrooms are a key element of the property appraisal process. Normally more bedrooms mean a higher market value. However, when conducting an appraisal, the real estate agent will take into account the size of the bedrooms, whether they have an ensuite, built-in wardrobes and any views.

When appraising your property, the agent will also look at similar properties that have recently sold with similar specifications as yours.

Fixtures and fittings

Not everything is always sold with the property. Curtains, for example, do not necessarily need to be included. Neither do light fittings.

When analysing the fixtures and fittings, the agent will first take into account whether they will be included in the sale price, and then if so, their condition. A potential buyer walking into your property and looking at everything they have to fix may push the price down.

Areas for improvement

Remember that no property is flawless, but some imperfections are worse than others. When analysing a property for appraisal, the real estate agent will look at all the areas that need to be improved, or even just could be updated. In fact, they are often a great person to ask where you should spend money on home improvements. They also know what local buyers are looking for and what they value in a property.

It may be as simple as a quick paint or replacing the door handles. Other jobs may be a revamp of the kitchen or bathroom. However, it doesn’t necessarily need to be a whole renovation – simple fixes such as a new vanity or new lighting can make a world of difference to the price you achieve.

As with anything, you need to weigh up the cost of the fix against the possibility of a higher sale price.

Location

As the saying goes – location, location, location. When it comes to appraising a property, your address does matter.

An agent will not only look at the street the property is in and its vicinity to local attractions, but they’ll also look at school catchments, what amenities are nearby and the accessibility of public transport routes.

But remember, just because your property isn’t necessarily near anything, doesn’t mean it’s not going to attract a good price. Sometimes, the quieter streets and areas are just as desirable.

Building structure and condition

The stronger the building and the better condition the structure is, the more your property is likely to be worth. Let’s face it, any smart potential buyer is going to request a building report, and if there are cracks (figuratively and literally) they’ll show. Your property doesn’t need to be the fanciest or the most modern, but the better built, the better the price. The last thing most buyers want to do is structural work.

If you are selling an apartment, potential buyers will want to see the strata report. This is a snapshot of the building’s history. This key document provides a history of the building, pending works, all expenses incurred over the past two years, as well as any disputes.

Overall presentation and fit out

Of course, nowadays, the overall presentation can generally be enhanced using a property stylist or rented furniture. While this comes at a cost, presentation is key when potential buyers walk through the door. And remember, you never get a second chance at a first impression, so you need to style to sell.

Listen to your agent if they suggest moving furniture around or taking some pieces out completely. Your property needs to attract people with its exceptional presentation, but it also needs to leave some ideas to the imagination of the buyer; they need to picture themselves in your property.

So pack away any family photos, certificates and personal mementos which could hinder this important process.

Ease of access

The real estate agent completing the property appraisal will take into account the ease of access to the property. This relates to access to the front door, access for a car and even access to the utilities.

Some people may not care about walking up a couple of flights of stairs, others will loathe it. For this reason, ease of access may be a big thing when it comes to potential buyers, especially if you’re gearing your property to a young family or elderly people. The easier it is to access, the more desirable.

Planning and restrictions

Sometimes, when you’re selling a property you’re also selling the potential of a property. So, when appraising a property, a real estate agent is always going to look at what other vendors have done in your area in terms of building, and they’re going to look at whether there are restrictions on planning in the area, and for your particular block.

Local council zoning also may impact what a person can and can’t do with the block of land, and if there are a lot of restrictions, it may put people off.

Market conditions and recent local sales

There’s no denying that the condition of the market will generally dictate what your property is worth. An agent will look at the recent sales in the area and overall market trends to get an idea of what price to present to you as a guide.

However, while the market may indicate a lot when it comes to purchase price, it’s not the ‘be all and end all’. A potential buyer may walk through your front door and fall in love straight away.

Property valuation

A property valuation is usually performed by a Certified Practicing Valuer for an agreed fee. They are not real estate agents or associated with any real estate agency. Generally, valuers will use one of three methods to value your property:

direct comparison
capitalisation
summation

They will inspect the property, carry out research and analysis into the local market and provide a detailed report regarding issues affecting the current market value of the home.

A property valuation service is commonly required by a bank or financial institution prior to approving a home loan. It is also used by buyers and sellers wanting an independent opinion prior to pre-purchase or pre-sale, family or partnership settlement, capital gains tax, and in some instances building insurance.

Property appraisal

An appraisal, on the other hand, is an educated judgement on what your home is worth. Not only will the agent look at all of the sales in the area, not just their own, but they’ll provide a unique insight into the local market. They specialise in your area after all. They also provide a figure based on insight into the features of your property.

Importantly, while the professional valuer’s figure is unbiased, the agent’s figure may even be influenced by conversations the agent has had with potential buyers in the area.

What happens in an appraisal?

It is always best to invite a real estate agent who is working in your suburb. You may wish to arrange to meet with a few local specialists for comparison and get a feel for how they conduct business.

It is always important to get to know a real estate agent before you really need one and appraisals are the perfect opportunity. While sales data is available online it won’t tell you the stories behind the sales.

Allow around about 30-minutes for the appraisal, however, this may be shorter or longer depending on the size of your property and if you have any questions.

Sales agents will present their opinion of value based on what they believe the property would fetch if it was listed on the market in the next four to six-week period. The figure is calculated by relevant sales and current competition. They will also factor in the volume of buyers looking in your area and what kind of properties are in demand. Usually, their report will be ready the following day.

Remember the figure given to you may change by the time you are ready to sell. So, if you are not listing for another year, it is always a good strategy to invite the same agents back when closer to when you want to go to market.

Step 1

Book your property appraisal

Property appraisals are nearly always free. Your local real estate agent is the best person to invite as they will be able to give you a good understanding of your property’s worth.

Step 2

Relax about the state of your home

You don’t need to worry about styling your home for a property appraisal. Real estate agents are experts at seeing through the general household clutter. They are more interested in looking at the size of the property, the number of bedrooms, the number and quality of bathrooms, the kitchen, the overall building structure and its condition.

So don’t stress about the pile of kids' toys on the floor, or the basket of washing that hasn't been put away…relax, have a cup of tea and simply show the agent through your home – warts and all.

Step 3

The real estate agent home visit

Once the real estate agent is at your property, they’ll likely have a good look around and ask you a few questions. Always be honest, especially about any renovations or upkeep you’ve done over the years. There will also be a chance for you to ask the agent any questions you may have. Some questions you may ask include:

What kind of experience do they have?
What is their knowledge of the local market?
How do they plan on marketing your property?
What recent results have they had?
What’s their commission?
Can they provide references?

Of course, there are many more questions you can ask. Don’t be afraid to say what’s on your mind. Remember, you need to be comfortable with the agent. They are, after all, selling your most important asset.

Step 4

Property appraisal figure and supporting documentation

The real estate agent will come back to you with the figure they believe is accurate for the market, area, and property. This will include supporting documentation such as local sales of comparable properties within the last 90 days and a summary of wider market trends.

03. Should you get a property appraisal?

Understanding the value of your property is a wise financial decision

Getting an appraisal isn’t always necessarily about selling. It can also be simply about understanding what your property is worth in the current market. If you’ve recently renovated you may want to know how much value it has added to your property. Perhaps you’re looking to buy an investment property, considering upsizing as the family has grown, or downsizing as the family has moved out. You may just simply be keen to find out if the value of your property has changed. Your home is undoubtedly one of your most valuable assets (if not the most) so knowing its worth is a wise financial decision.

Lifestyle and family changes

Whether you’re starting a family, growing your brood or facing an empty nest, your needs over life’s journey change. If you need more space, or you’re hoping to downsize because you don’t need the family home anymore, then getting an appraisal is the best starting point for your future plans. It takes the guesswork out of wondering how much your property would fetch if it was listed on the market today. The value may even be higher than what you expect. It also means you don’t have to try and figure it out on your own based on rumours of what a neighbouring property may have achieved.

Location changes

Just because you loved a location when you first bought your property, doesn’t necessarily mean you love it now. Job changes, lifestyle changes and neighbourhood transformations can all influence whether you want to stay or move.

For example, while you may have appreciated inner-city living as 20-somethings, the lifestyle may not suit your kids. The same goes for those who no longer love living in the suburbs.

What’s important though, is knowing what your current property is worth so you can figure out what you can afford for the next. An appraisal will help.

Financial changes

More money, less money – both are reasons to sell a property. For those earning more, it may be time to step up. For those who are retiring, it may be time to downsize. The changes in financial circumstances are a big reason many Australians decide to put their property on the market.

Of course, a fluctuating Australian dollar also impacts a person’s ability or need to sell. While financial changes may result in a limited ability to do the small or large improvements necessary to sell the property, getting an appraisal means you can understand what the property is worth in its current state. It allows you to weigh up the option of selling it as is, or holding on to the property for a little longer.

Finding an agent you can trust

If you decide to sell, there are several steps to take. First and foremost, you need to choose an agent. When deciding on a real estate agent, you need to find one you’re comfortable with and one who you trust.

Selling Checklist

Choose the right ‘value- add’ home improvements

Another thing you’ll need to do, once you’ve decided to sell, is to walk through your property with fresh eyes – as if you were a potential buyer. This will hopefully give you a good idea of what the buyer’s first impression will be and will indicate the ‘problem’ spots that need attention.

Styling to Sell eBook

Tackle the Important Questions

When talking to the real estate agent, it’s also important to discuss the best way to sell your property; via auction, private treaty, tender or expression of interest. Your real estate agent will be the best person to guide you on this.

Selling Real Estate FAQs

Marketing Your Property to Sell

Effectively marketing your property is a critical part of achieving a successful sale. A well-rounded marketing plan with a mix of different advertising channels such as the internet, social media, signboards, local marketing and newspaper advertising all play an important role in spreading the word about your property and creating healthy competition among buyers.

Access our guide

Once you’ve decided what needs work and what doesn’t, it’s time to spring into action. Everything will need to be completed before professional photos are done. You’ll also need to declutter where possible, and you may even need to rearrange some furniture. At this stage, it’s a good idea to listen to the experts as they often know what potential buyers want to see when they walk through your door for a house inspection.

Selling your property

If you have been pondering just what your property may be worth, whether you are ready to sell now or perhaps in the future, then it is time for an appraisal.

Being educated and informed allows you to make smarter decisions that more positively affect your current and future financial well-being.

It is an easy, informal and essential process that is simple to organise. Who knows, the appraisal results may even surprise you and unlock even brighter years ahead.

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Understanding Property Appraisals: A Home Owner's Guide

01.

What is a property appraisal?

What's involved in a property appraisal?