Having your property valued is the first step on a very long path to moving house. It may seem like an easy task for a practiced estate agent, but more thought goes into your valuation than meets the eye. Want to know the industry secrets? Of course, you do!
Today our agents are sharing their valuation secrets to help you get the most of the process.
Appraising a home isn't an exact science. At the end of the day, a home is only worth what someone is willing to pay for it.
To achieve the best possible price it is incredibly important to arrive at a realistic marketing figure from day one. If the appraisal is wrong then the property will remain on the market becoming 'stale' and the longer a property is on the market, the less it achieves.
Some agents will pluck a figure out of thin air but I certainly believe that conducting some diligent investigative work pays dividends to find out a figure that will attract as many potential purchasers as possible.
Personally, I spend at least an hour and a half investigating pricing before I step into a client’s home.
Some agents will overvalue a home to simply get you to sign up on their books. But what's the point when you'll be sitting on the market for a long time, losing out on opportunities for yourself and, ultimately, losing money on the home you're trying to sell? The most important question a seller could ever ask of an estate agent is 'how have you arrived at that figure?'. If you're met with a stunned look or hesitation, be prepared for a long and bumpy ride!IMAGE
I base valuations of three forms of research:
1. What has sold on the street and neighbouring roads?
2. What is currently for sale on the street and neighbouring roads?
3. What type of buyers are registering?
When actually valuing a house, there is a lot to consider. Apart from the obvious factors of:
I also consider the following:
1. Consistency in price per square foot
2. Nearby schools
3. How close the transport links are
4. What amenities are on your doorstep
5. How motivated the seller is - whether they need a quick sell as part of a chain or whether they want to take their time and find the right buyer and the right price.
The true value of any property is the price a ready and willing buyer is prepared to pay on a given day. Establishing what this figure might be ahead of marketing is both an art and a science.
From a scientific or objective point of view, we can look at quantitative factors such as the size of a given building and the extent of its grounds and then compare it to other properties that have recently been sold with similar characteristics. There are a myriad of other factors including condition, surroundings, proximity to facilities, commuting potential, availability of schooling, visual amenity and so much more.
Supply and demand are the key factors when assessing the potential of any given property and a well-known agent who really has his or her finger on the pulse of a local market will know instinctively what is in shortest supply and highest demand. The art is in drawing all of these strands together and making an accurate assessment that will balance the needs of both buyers and sellers.
Paul Kirby, Fine & Country Canary Wharf
I think it is essential for an agent to formulate an estimation before even stepping in a property. This figure is typically reached from considering the property’s location, its type, condition and the countless other factors and variables to consider. One of the first questions I ask myself is: How many applicants do I have for this particular property? Our intuition of our applicants allows us to pinpoint individual applicants to create a list of highly probable buyers to send to the client at the end of the valuation.
When I visit the client’s property, the most successful valuations come about when the client shows enjoyment while showcasing their home and is proud of their biggest asset. The key is for them to be themselves and to be comfortable having an agent in their home. I discuss with them at the end of the valuation that me and my team will conduct a string of telephone calls to our hottest applicants to gain an insight to their exact requirements and what they would be willing to pay should a property like the one I’ve seen come to the market. Within 24 hours, I am able to convey to the vendor the findings of my report and therefore reveal the final valuation figure.
Valuations are a mix of an art and a science because if you talk about price and figures of the property the approach is fairly scientific and most of the time a valuator does scientific calculations to arrive on the right price.
But in many cases there are other values attached to property and current owner such as family history, values, significant events, celebrity visits and specific historical values of the area. These values add a lot of colours and taste to the process of valuation. Therefore, a good valuator should be logical but should also have artistic taste and understanding.
The clients know the pros and cons of their property better than the estate agent does. They can provide specific information regarding features of the property which surely can affect the price, modifications made to the property, additional info regarding historical values/events, specifics of the area, including why they have been living in the area for many years.
The prospective seller wants the best possible valuation of a property into which she has invested money, time, and often a great deal of emotion. It usually carries treasured memories of parents, of happy holidays with children who have since flown the nest, of loves and of hopes and past aspirations. Every property has a history, and the agent has to understand this, and be sensitive! Importantly though, he or she must be realistic because emotionally attached as the seller might be to the property, situations have changed and the property must be sold, and a valuation that is too high will effectively preclude a sale.
The prospective buyers on the other hand know little and care even less for the emotions or the wants and needs of the sellers, and simply want the property of their choosing at the best possible price. However, it should not be priced so low as to seem to ‘devalue’ the property or to make them wonder ‘why’ it is priced below the market.
Market value is the key word. Sellers want to feel that they achieve ‘above market value’ and buyers want to feel that they have bought well, or ‘below market value’ so it is a difficult balance.
I never give a ‘valuation’ figure. Instead, I spend around two hours on research and go through the evidence with the seller. Together we establish where we think the market value is. Then we discuss a pricing strategy. We establish market value based on three indicators:
● Square Footage - We work out the square footage of the property and look at what price per sq ft we are achieving for similar sized properties in that area.
● Sold Comparables - We look at similar properties that have sold recently and decide if the owners property is worth more or less. Then we put a figure of how much more or how much less it is worth - How much prices have risen since the owner purchased the property. Finally we look at what the owner paid for the property and work out from land registry how much prices have increased during that period in their postcode. So if the seller paid £1 million 6 years ago and prices have increased by 50%, the evidence would suggest a current market value in the region of £1.5 million.
This is not an exact science but the above indicators will often point to a market value that is researched and justified, rather than just an opinion. Sellers appreciate all the research and evidence I have provided so they can clearly see where their property sits in the market. I also prepare them and warn them about other agents who just come up with a high valuation figure just to make them smile and win the listing. So when another agent does try this trick they are prepared and can see through it. I also suggest that if this happens and an agents says their house is worth £1.75 million they should ask the agent following question. “Can you show me a property similar to mine, that you have sold recently for £1.75 million?”
If they can, then I will be the first to agree your property is worth £1.75 million, however based on the research I have done, I still have quantifiable research to back up my decision.
Key things that one needs to consider are location, condition and facilities offered by the subject property, and this needs to be balanced with other elements such as areas that are on the decline or, indeed, areas that are on the up. Proximity to facilities in the way of schools, hospitals, retail and leisure outlets can also play an important part depending on the requirements of prospective buyers.
Valuation of residential property is neither a science nor an art and arguably falls somewhere between the two. An asking price needs to be the maximum price that one can justify whilst still attracting prospective buyers over the threshold. Pitching the asking price too low would doubtless attract high levels of interest with the prospect of a bidding war. Conversely, pitching the price too high may lead to disappointing levels of interest with reluctance for buyers to view.
Finally, an understanding of construction can never be underestimated when assessing a property’s worth, and whilst we rarely undertake a building survey prior to marketing a good in-depth look at the property, together with its gardens, grounds and outbuildings if appropriate, will greatly assist in arriving at that suggested value and asking price.
In truth, valuing a property is a subtle combination of both skill and art. It’s a process that requires significant research, genuine local knowledge and a dash of something extra – normally provided by an experienced estate agent who really appreciates the nuances of the very latest market trends, particularly in the ‘micro-market’ that operates for each and every individual home.
In these days of on-line intelligence and data, there are even instant online valuation tools to provide a rough guide, which should then lead to a more accurate assessment from a property professional.
The honest valuer will always provide a spread of values, ranging from what can be (almost!) guaranteed through to what might be achieved if all of the variables are acting in favour of the property owner. Variables such as location, proximity to facilities, parking, condition, size and number of rooms are obvious, but their impact on actual value will be very subjective and will be dependent upon the specific requirements and needs of an individual buyer.
Ultimately of course, the old adage that a property is worth what someone is prepared to pay is as true today as it has always been.
The agent determines the value by analysing the facts and figures based on the current economic climate and statistic property report.
The first step of the process is to conduct a seller interview which entails gathering the relevant information and an inspection of the property.
The economy plays major role in analysing and determining property values when we look at the statistics provided in terms of growth and market activity. The financial institution will look at risk in terms of investment i.e the area, age, condition and improvements as well as size and rand per square.
The market place looks at the economics, location, size and condition in terms of value and future resale projections in terms of the time period it will take to see a return on investment.
It is mix between art and science, the science aspect calculates and determines the value, while the art aspect looks at architectural design and aesthetics.
It is helpful when clients provide all the relevant property information and history, total disclosure of latent and patent defects. As agents being interviewed in terms of our expertise and knowledge sellers should ask our opinions and advice.
Request your FREE, no obligation property valuation with Fine & Country today by heading on over to our website. Alternatively, you can give us a call or email us to speak to your local agent.
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