These days everyone has an opinion on real estate; many like to tell real estate agents at BBQs and other social events how much their property is worth, how their neighbour ‘under sold’ and got ‘ripped off’ and so on…it’s practically a national sport!
However, actually placing a price on a property clearly requires some rationale based on many factors; this is why independent valuations are helpful and buyers will generally give them credibility when deciding what their offer will be for a particular property.
If you want to be a bit scientific about it (which is essential), here are some tips to assist you to think like a Valuer:
- Take the ‘emotion’ out completely, your judgments need to be based on evidence and facts;
- Research – this is critical. Know what’s happening in the local market; attend auctions, get online, and see what properties are actually being SOLD for as opposed to LISTED at, talk to a variety of local agents;
- Inspect the actual property thoroughly, look for all positives and negatives;
- Procure an independent valuation – get the professionals to provide you with their estimate, it equips you with some collateral when making (or rejecting) an offer;
- Location – has a huge impact on price and re-sale appeal/value, we cannot stress enough the importance and value of a desirable as opposed to undesirable location. However, this can change over time also due to varying factors such as public perception, infrastructure projects etc…this is very much an organic variable;
- Comparison – look at what similar properties in the local area have sold for recently;
- Overcapitalisation – don’t pay extra because someone has overcapitalised, you don’t need to pay for their poor decisions;
- Context – remember everything is interconnected and the ‘whole’ picture needs to be looked at. In regard to price, the market can change quite quickly, it is important to find the most recent prices achieved, because even a year prior can be misleading in certain markets due to the fluid nature of all of the factors that influence price. For example, global financial events causing uncertainty can very quickly impact the housing market, or localised events such as announcement of the closing down of a factory that is a major employer in the area.
Ultimately the key is research and ensuring you are getting professional advice from independent sources also. Many family members, neighbours etc…may mean well, but ultimately buying and selling a property is a huge financial commitment that stretches for many years, and it is just so important that you are equipped with enough relevant information to make the most informed decision possible.