Buying or Selling a Residential Property & Want to Know the Difference Between a Assessed Valuation and Agent Appraisal?
Sue Ostler Buyers Agent
LREA Accredited Buyers Agent. I help busy professionals source and secure homes & investments | Auction Bidding | Negotiations |
If you are considering buying and need to sell, the first step is to find out the value of your current home. Working out what your property is worth is the absolute foundation of most home sellers and buyers.
When it comes to all things property, it's important to deal with facts. Getting your property valued is a structured way to review the property and your options moving forward. Part of the process is to really understand the value. Clearly understanding the value will help you decide on the next steps and plan your options.?The other benefit is that you are less likely to be vulnerable to market shenanigans.
Assessed Market Valuation Vs. Appraised Market Value
When deciding how to get your home valued, there are three main ways to go about it. You may opt for an online estimate, an agent appraisal, or a full formal valuation assessment. It's important to understand the difference between them.
Three available options:
1. Online property estimation
2. Agent Appraisal
3. Assessed Formal Valuation
Did someone say agents who bluff or come in with lowball offers?
Online Estimate
A digital online estimation is an excellent way to get an initial feeling for a very rough idea of what your home might be worth, especially if you're about to meet with a real estate agent and you are doing your "homework." But, and it's a big but, the online estimate is a generic process which depends entirely on how current the data is. That means it could be WAY off the mark, especially if the home has had improvements or modifications which have not been updated on the online platform and are therefore not reflected in the estimate. By all means use it, but take the outcome with a pinch of salt.
Independent Agent Appraisal
An agent appraisal indicates from a sales agent how much your property is likely to sell for in the current market. A local agent comes to "appraise" the property. They will look through it and compare it to the results and condition of recently sold properties in the area.
The agent's assessment is based on the condition of your home, its features and characteristics, the performance of the local market, the volume of stock available, the number of buyers in the area and comparable sales. The agent provides a verbal opinion of how much they think the home is worth based on the above. This is an informal report and as such the agent could spend sixty minutes scouring the property or they could spend ten. The outcome will depend on how thorough they are and their level of local market knowledge.
A market appraisal is free. The tricky thing here is that the appraisal figure could vary if you have three different agents inspect the home, which we strongly recommend. It then becomes tricky to decipher which estimate is most accurate. At that point, you may opt to get a formal valuation as well.
Assessed Market Valuation
A valuation is a legal and formal procedure to determine the value of a property. It is the formal process used by financial institutions such as lenders, banks and insurers. It takes a closer look at the property and its features and considers several factors to give an accurate value of what the property is currently worth.
Assessment factors include location, nearby amenities, local infrastructure, the property's structural condition, visual appeal, local zoning restrictions, and more. The valuation report is a detailed, legally binding document of an assessed market appraisal to determine the property's market value.
The valuation is carried out by a certified and accredited valuer who has completed formal education and training. They are typically an independent professional who works on behalf of banks and other lenders.
When To Get a Property Valuation
Valuations are required when a definitive value is needed, such as working out family or partnership settlements, establishing the value of a deceased estate, or obtaining finance from a lender. You would most likely get a property valuation when you apply for a home loan, as most lenders require one before they approve the loan. When dealing with a family or partnership settlement, you would also get a property valuation. Likewise, you may need to know the value of capital gains tax, and in some instances, you may require it for a building insurance policy.
In the case of lenders, they need to ensure the property is a suitable security for a loan and that the market value is enough to cover the mortgage if there is a forced sale.
The valuation report often provide advice and valuations for Family Law Court proceedings, litigation, expert witness, arbitration, dispute resolutions and retrospective valuations. They specialise in delivering property advice for self-managed super funds (SMSF), fair market value, stamp duty, insolvency and bankruptcy, property portfolio review and ATO compliant tax depreciation schedules and Capital Gains Tax Assessments. They also look after estate and probate matters, compulsory acquisition, strata insurance, rental assessments for tenants and landlords, pre-purchase and pre-sale advice, lease negotiation & mediation. Some valuation companies offer other areas of expertise around the valuation.
A property's assessed value is different from its market value in that it may be used for legal or tax purposes or used to apply for finance through banks or lending institutes. Thus keep in mind, this process looks at your property from a risk perspective and the amount of the valuation may be less than the total amount you believe you could get in the current market. While it does not necessarily determine the market value, or the amount a home will sell for, it fulfills a need for the owner.
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Why To Get a Valuation?
A valuation may be helpful in the following circumstances if you are:
1. Pre-sale: selling a property and have become disenchanted with the appraisal figure provided by the local agents. You may get a valuation to present a more accurate figure in that instance.??
2. Managing your SMSF
3. Purchasing: Thinking of buying the home in which you currently rent
4. Are a legal guardian representing the owners
5. Need help with a Family Law matter
6. Need help with taxation issues as advised by your accountant
7. Have received property valuation advice and want a second opinion
8. State or Local government entities and private enterprises wish to purchase the land or property for development or public purposes.
10. Estate Planning & Probate for Deceased Estates
11. Compulsory Acquisition
12. Rental Assessments
13. Property Portfolio Review of Investments
14. Valuations for Properties Held in a Self-Managed Super Fund (SMSF).
15. National Service:
How is the Valuation Calculated?
To start with, valuers will look at the most recent comparable sales in the area in terms of land attributes, improvements, location and planning controls to provide a ballpark figure. They will also visit the individual property and assess the following features.
Once they have all the information, the valuer will provide you with a report within a few days after their visit. In many cases, the valuation report will be more conservative than a property appraisal with a sales agent because of those factors that are not considered. For instance, the formal valuation does not consider how people's emotions, market knowledge and other motivations might affect the final sale price.
How Much Does It Cost
Although there may well be a difference between the assessed and appraised, or market value of a property, these two figures are often also quite similar, as they utilise many of the same components to arrive at a fair price. These two ways of determining a home's value differ significantly because they are used for different purposes. A home appraisal or market valuation is usually done to sell a property, while home assessments are necessary to tax the property accurately.
Property valuations can cost around $500, whereas any licensed agent can obtain market appraisals for free. If you believe the agent is honest and reliable, you should be able to organise a free market appraisal.
Can we help you with your property needs?
If you want to explore market value, please get in touch. We know the Sydney market well and understand it. If you'd like advice about the property market, whether you want to sell, buy or lease, we're here to help. Email: [email protected]