So you’ve decided to sell your home! Whether you’re upsizing, downsizing or selling your investment property, it’s important for you to get the best price.
The first step to getting the best price is also one of the first steps you would take in selling your home: getting an estimate of your property value. It used to be the case that your only option would be to just ask a real estate agent to conduct an inspection and base an estimate on that. With the emergence of property valuation websites and other sites promising comprehensive property reports, things have got a little more complicated.
So what is the best way to get a property valuation?
Are some methods more accurate than others?
We’re going to look at some different methods in an attempt to demystify the process and help you decide which is the best way for you to get your property value estimate.
Comparing Property Valuation Methods
This table shows some of the most important things to consider when having a estimate done on your property. Below, we’ve explored each method in more detail.
Is the valuation free?
Property seen as part of valuation?
Real estate agent
Property Valuation Websites
*There are options for paid property reports on some websites
** Sometimes, banks will only do an automated valuation where they don’t view the property. This is most often the case for lower value properties when it is one of the ‘Big 4’ Australian banks (NAB, ANZ, Comm Bank, WestPac)
Real Estate Agents
As mentioned earlier, real estate agents are the ‘traditional’ option for getting an estimate on the value of your house.
When you get an agent in to give you an estimate, you’re getting a level of experience that more recently available methods might not have.
To have your property appraised, you’ll have to arrange an appointment with an agent, who will then come to view the property. They’ll be looking for a number of things including anything that need repairs, how many bedrooms and bathrooms you’ve got and how many car spaces you’ve got. They’ll also take into account things you can’t change, like the location of your house – are you near open spaces? Public transport? Are you under a flight path or next to a busy road? Obviously, there’s not a lot you can do about these factors, but it’s important to know what agents are looking for. It’s also good to think about what you can do to decrease impact, especially from noise pollution.
Once your agent has a feel for your property and what it looks like, they’ll go away and do comparative market analysis to form the basis of their report. Comparative market analysis means that they’ll look at sales data from the area to see what similar properties have sold for recently and what other vendors have their properties on the market for. This can be complicated if you have a unique property or a very high-value home. That’s why it’s important to find top agents in your area, who will have the most experience and expertise.
Because they have a very holistic view of your property, having seen it as well as done the comparative market analysis, real estate agents are in a good place to offer a realistic estimate of your property. They can be biased, especially if they think you might enlist them to sell your property, so we recommend getting appraisals from more than one agent.
There’s no real order to this list, but we’ve put real estate agents first because we think they should be your first stop when getting an estimate on the value of your property. It shouldn’t cost you a cent and when you consider all of the local knowledge and expertise you’re getting for free, we think it’s a no-brainer. Like we said, if an agent knows that they’re the only agent you’re speaking to, they might give you a biased estimate, so it’s worth seeking the opinion of at least two agents.
In all states and territories apart from Tasmania and Victoria, valuers have to hold a license, complete a certain amount of training or have a certain amount of experience to operate in that role. More information on your state or territories regulations can be found on the Fair Trading website for your area.
The reason that there are so many rules and regulations is that valuers provide a legally binding valuation of your property– you don’t want just anyone doing that!
A licensed valuer will always visit the property to conduct a full inspection of the interior and interior and exterior. They’ll have already done research on properties sold in the area, as well as what the local area is like. This doesn’t just mean the advantages of living in that area – it also means knowing whether the property is located near a main road or if there are landmarks, like cemeteries, near by which might pull down the value of the house in the eyes of a buyer.
Inside the property, they’re looking for similar things to the real estate agent: the number of rooms, especially bedrooms and bathrooms, what the kitchen looks like and whether the house has a logical design. For instance, is the bathroom on the opposite side of the house to the bedrooms? Small things that you’ve gotten used to might be off-putting for new owners and thus, affect the value of the house in the eyes of the valuer.
Outside the property, they’ll take into consideration the architectural style of the building, the layout and aspect of the lot (north facing properties are always the most sought after) and the development potential of the land. They’ll also measure the land and make sure that the boundaries are in accordance with where they should be according to the title which is important when it comes to selling your property.
Valuers have two methods which they use to come to a valuation: direct comparison and summation.
Direct comparison means that valuers compare your property to similar local properties sold in the last six months. This can obviously be difficult if you live in a unique property or if there’s a lack of property local to you.
Summation means that valuers will add up the value of the land and the improvements made on it. This method gives you a much more accurate value of your property – but there’s no guarantee that a buyer will agree.
Most professional valuation companies will use a combination of these methods to come to their final valuation.
As noted in the table above, you will pay for a property valuation. Price will depend on the size of your property and where it’s located, but a fee of $300 for an average valuation seems to be about the norm.
Banks will normally contract professional valuers to conduct inspections for them, but when they work for banks, valuers are looking for different things.
Banks conduct inspections when someone applies to them for finance, either to purchase property or remortgage it. As a seller, you don’t normally need to be overly concerned by bank valuations, but as a form of property value estimate, we thought we’d put them on the list!
A bank estimate will nearly always be lower than the estimate made by a real estate agent or a valuer working for you.
Why? Because a bank estimate is the highest amount they would possibly recoup if for whatever reason they had to repossess the property.
Banks will value in one of two ways: either using a professional valuer to inspect the property or doing an automated valuation. Smaller banks will nearly always do an inspection – they need to be more careful as they have a lot more to lose.
Large national or multi-national banks, including ANZ, WestPac, CommBank and NAB, are more likely to use automated valuations, especially when the property has a lower value. We’ll discuss the issues with automated estimates further down, but bear in mind that banks are not only looking for different things, they have access to different information than property websites do.
Things bank valuations will look out for include a market that has increased in value over a short space of time – they’re worried that such good fortunes might not hold – as well as zoning restrictions and heritage listings on the property. Anything about the property which will make it hard to sell in a short space of time will make it less valuable to a bank, even if those features might increase its market value.
Remember that for a bank, the value is the most it can expect to recoup if it has to sell the property after repossession. It won’t always be reflective of what you can expect to sell the property for.
If you type ‘property value report’ into Google, you’ll be hit with results from an overwhelming number of sites offering free property reports. These reports will often give a sales history for your property, an overview of local recent sales and an estimate of the value of your property.
Here’s a sample report from homeguru.com.au.
This report gives a range for the estimate of the property value, lists of local sales as well as a more targeted list of comparable sales, links for home loans and some demographic information. It also gives an idea of what information was used to make the estimate – number of bedrooms, number of bathrooms and comparable property sales locally.
Instant property reports are great to give you an idea of the local market. They’re easy to read and give you the basic information you need to know. They have similar limitations to websites: they’re based on a computer algorithm and so they only know what’s fed into them. That’s why it’s worth finding out where the data is coming from.
Which Real Estate Agent uses data from CoreLogic, Australia’s most comprehensive source of property data, covering 98% of the Australian property market. You can find a sample property report here. Even better, you can get your personalised CoreLogic report from Which Real Estate Agent direct to your inbox for free.
Different sites use different property data but they all work on the same principle: comparative market analysis.
That’s right, the same as real estate agents! What makes these sites different then?
The sites are operating sight unseen, that is, they haven’t seen your house. They don’t know if it’s falling apart or if you’ve just done a $50,000 renovation. Without seeing the house, it’s hard to make an accurate estimate.
The computer isn’t an expert on the local area. All the computer knows is based on the numbers that are fed into it. Ideally, the agent you choose to make an appraisal will have worked in the local area and as such will have a much better feel for it than can ever be fed into the computer.
Websites often have trouble completing estimates for high value properties – this is something to bear in mind as property prices across Australia continue to increase. This is normally because they’re incomparable to other properties in the area.
Sites can offer an interesting snapshot of the value of your property but they are severely limited in what they can offer. If you’re interested in using one, be sure to check out our study which looks at which site provides the most accurate value estimates!
Do It Yourself
Maybe you’ve been reading this article and thinking ‘that doesn’t sound too difficult!’. Maybe you’re unhappy with a valuation you’ve been given by a property report or real estate agent. Perhaps you’re just curious about how much your home is currently worth.
If any of this sounds like you, you can do some basic comparative market analysis from the comfort of your own home and we’ll explain how!
Look at recent sales data from your area: if you’re in an urban area, stick within your suburb. If you’re rural, this step might be slightly more difficult but you know your local area better than us! There will be records online of auction results and sales data can also be found on the websites of real estate agencies.
Look at the comparable properties: if you’re selling a 2 bedroom unit on the beach, the three bedroom terraced house five minutes walk away isn’t a good comparison. Find homes with a comparable number of bedrooms and bathrooms, of the same age as yours and with comparable outdoor space.
Work out your property’s added value: have you added a new kitchen or bathroom? Is your property recently repainted? Do you have a spa or pool in your yard? All of these things will add value to your property but remember that the added value is rarely as much as you paid for the upgrades.
Want a quick idea? Just use our property value growth calculator below. It calculates how much the property may have appreciated in value since the purchase date.
We’ve spoken about how important local knowledge and getting a feel for the property are when making an estimate on the property value. You must be thinking, ‘Great! No one knows my home better than me!’ but when you’re doing the estimate yourself, this can be more of a curse than a blessing.
The emotional value of your house can’t be estimated as a monetary amount and neither should it be – the buyer won’t know about the hallway where your son took his first steps, for example. If you choose to estimate the value of your own property, try to stay as objective as possible.
As you’ve seen, there are a lot of different ways to get an estimate of the value of your property. Each of them have their merits and we’ve also highlighted the weaknesses of each method to let you make the best decision for your circumstances. In the end, it’s important to get a valuation or estimate from someone who has seen the property – that way you know you’re getting a personalised experience from a real person. You might choose to get one of these as well as using online services like the property reports or websites we’ve detailed.
Here at Which Real Estate Agent, we recommend getting as many estimates as you can – this is one of those times where less isn’t more. If you’re going to get more than one estimate or value, the best place to start is with local real estate agents. We get that finding the top agents in your area can seem stressful but our team have made it very easy for you. Compare top real estate agents to get a valuation with our comparison tool.