If you’re looking to buy your next home or investment property, or even if you’re considering selling your property, a question you would be asking yourself is: ‘How much is this property really worth?’
BY MICHAEL YARDNEY
Who do you ask – the selling agent? A valuer? A buyers’ agent? Maybe the bank?
It probably won’t come as a surprise that they’re all likely to come up with different values for your property.
You may have heard of the concept ‘fair market value’ in property, which is the price a buyer will pay and a seller will accept given that neither the buyer nor the seller is under pressure to close the deal. Pressure, or motivation, comes from life changes such as divorce, a sudden job transfer, difficulty meeting mortgage repayments or a death in the family and these things compel either the buyer or seller to act quickly.
Now when we’re talking fair market value, let’s get one thing clear – it may not always be ‘fair’ to you.
It may not be what you call ‘equitable’ because fair market value is impartial; it takes no sides and it doesn’t care about what you need or what you want. As a buyer you want to buy the property at the best price possible and as a seller you want to achieve the highest price for your home.
So back to my original question – who do you ask for advice?
The real estate agent
If you ask the selling agent what the property is worth, he’s obliged to work for his client – the seller. While he can give you details of comparable sales and an indication of interest in the property from other potential buyers, the selling agent should be trying to maximise the sale price for his vendor.
You could pay $400 or so and get an independent professional valuation, but you’d probably be disappointed.
I’ve found that a formal valuation is of limited benefit in setting a realistic market price to purchase a property and will generally be low when choosing the asking price when selling your home. It’s just another figure to add to the mix of possible prices.
In general I’ve found valuers come down on the conservative side, particularly in the current market.
When you apply for a loan for your new property the bank will determine its value, but again this may not accurately reflect the property’s market price.
Banks tend to value properties at a figure that will reflect what they can reasonably expect to recoup if they take possession and onsell your property if you default on your loan repayments.
A buyers’ agent
A buyers’ agent could be a good source of independent and unbiased property price advice.
A buyers’ agent is a licenced estate agent, but the opposite to a selling agent, because they work for and are paid by the buyer.
If you chose one that works in the geographic patch you’re considering, they should have an intimate knowledge of the property market, what’s selling and what isn’t and the prices properties are selling for.
They can assist with background research and pricing and you can use their negotiating skills to help you obtain the best price.
To be successful in today’s flat property markets thorough research and astute property selection is important, as is buying at the right price. Investors can’t count on the rising tide of property prices to cover up their buying mistakes.
What do you think is the best way to determine the value of your property? Tell us what you think.
Michael Yardney is the director of Metropole Property Investment Strategists, a best-selling author and one of Australia’s leading experts in wealth creation through property. Subscribe to his e-magazine at www.propertyupdate.com.au. For more information about Michael visit www.metropole.com.au.