Prior to buying or selling property, it is crucial to have an idea of the value of the property you are looking to transact on. Understanding the value of a property you are looking to transact on will allow you to make well-informed decisions, increasing the probability that you are paying a fair price as a purchaser, or receiving a fair price as a seller. To determine accurately what the value of a property is, it is important to avoid the following mistakes, which can compromise your ability to make a well-informed decision:
- Using outdated market data: When gathering market evidence to determine the value of a property, it is imperative that you secure the latest information to underpin its value. Market data from years or even weeks ago may not reflect current conditions and is likely to be an obsolete data point. If outdated market data is relied upon to determine the value of a property, it is likely that the value of the property will be inaccurate. Ideally, source market data within six months of the property valuation and prioritise recent data points more highly than older data points.
- Failing to research comparable properties: When using comparable properties to underpin the value of a property, ensure that the comparable properties researched are as “like-for-like” as possible. This means that comparable properties should be near the property that you are looking to value and have similar or comparable attributes. The value of recent comparable properties can be used to form the benchmark for your property’s value. If recent comparable properties are near similar to the subject property, this heightens the probability of determining a realistic benchmark value.
- Overestimating your property’s value: A property will be difficult to sell, especially if its value is over-inflated. This often happens especially if the seller of a property is emotionally attached to the property or ignores the property’s flaws. Similarly, a seller may overestimate the impact that improvements made to a property will have on its value, which may put prospective buyers off especially if they do not see the value of improvements made. To prevent an overestimating of a property’s value, assess the property as objectively as possible. This requires a realistic consideration of the property’s attributes such as location, condition, improvements, land size, floor area, finish, age, and construction.
- Overlooking market trends: Ignoring current market trends can lead to you undervaluing or overvaluing your property. The property market is heavily impacted by current market trends including interest rates, economic conditions, and supply and demand factors. It is advisable to include a consideration of current market trends in determining the value of your property, running in parallel with a consideration of comparable properties.
- Not considering your property’s potential: A property may be underutilised, where a potential renovation or redevelopment can add a significant value margin. Neglecting to consider the potential of a property leads to an undervaluing of property and may cause you to miss out on potential profits. To determine a realistic value of your property, consider the property’s potential for development or renovation, that would ensure that the property is optimally utilised.
When purchasing or selling a property, it is imperative that you have an idea of the value of the property prior to transacting on it. By avoiding the above mistakes, you will give yourself a greater probability of determining a realistic benchmark value of your property. Nonetheless, it is advisable that you get a professional’s opinion especially if you are unsure about the value you have advised on your property. Call us on 1300 359 886 or send an enquiry form on our contact us page.