When it comes to differences between buyers and sellers, each could have a different view on value. As a buyer, you want to know you’re not paying too much and as a seller, you want to know you’re getting what you should for your property.
We break down all you need to know about a property’s value below:
Difference between market value and market price
When it comes to the market and sale values, you might think they should be relatively similar. First, definitions are always a great start.
Market value: This takes into consideration the features and benefits of a property, current market conditions as well as supply and demand factors.
Market price: The price someone is willing to pay for a property and what the seller will accept.
You might think that the two final figures should be close in amount, however, there can be variances between the two.
This can come down to a fast-changing market and any sudden rise or fall in property values can shift outcomes when past sales are used to help determine current values.
If a market is higher on the demand side and lower on the supply side, this could also influence how much a buyer would be willing to spend on a property, especially when emotions come into play.
How banks determine property value
Bank valuations vary greatly to market valuations. A bank will base its valuation on the potential event of needing to sell the property urgently, rather than trying to get the best price or taking into consideration the market as heavily as a market valuation would.
To complete this, a bank or lender generally uses three forms of evaluating, which are a kerbside valuation (which is completed from outside your property), a desktop valuation (where a report from a data provider forms the value estimate) and a full valuation (where a valuer visits the property to complete a full inspection).
Why you should know the value of your property
- You’re buying
Whether it’s your first or tenth time buying a property, knowing the value of the property you want to buy is incredibly important to know you’re not overpaying for it.
2. You’re selling
When it comes to selling, you don’t want to sell for significantly lower than its market value.
3. Insurance coverage
Knowing the current value of a property (not just the sale price) can help ensure you have adequate insurance coverage if something were to happen.
4. Renovating
Knowing the value of a property can help guide you in making the right renovations to avoid spending on areas that may not change the value of the property. A detailed valuation that breaks down the condition of each area of a place can help you spend money where it matters.
5. Retirement
As part of planning for your golden years, knowing the value of a property can help you make smart financial decisions, whether this is downsizing, selling, buying, or anything else.
Tips to value a property
Look locally
It’s always a good start to look for other properties in the local area. Keep it quite close to where you’re either buying, selling or currently living and keep it to the last few months.
Look for similarities
When comparing to other places in the local area, look for similar land size, number of rooms, location and how close it is to transport, as well as if the quality is similar.
Move with the market
Things can change quickly in the property market and the faster it moves, the less you can rely on previous sales in the area, especially from more than a few months prior. It’s helpful to know what’s happening in the market and how it’s affecting your local area.
Dive into data
There are huge amounts of data available to help you understand what’s happening in the property market. Looking for median house prices, auction clearance rates and how long a property has been on the market are valuable sources of information.
Regardless if you’re a first time home buyer looking to buy, looking to upgrade or downgrade, or even looking to buy an investment property, it’s important to have your finances sorted before you start actively looking.
