Once you have decided to sell your property, you will need to get an accurate valuation of your home in order to determine the potential sale price. However, property valuations can be a complex and difficult process.
Get the valuation wrong and your property might not sell, or it might sell for less than the property is really worth. So how should you go about organising a valuation that accurately reflects the realistic value of your home?
Estate agent valuations
Contrary to popular belief, most estate agents do not routinely conduct a detailed home valuation. They indicate, or suggest, an appropriate sale or rental price for the marketing of your home. However, when you are selling a property, estate agents are often in the best position to gauge how much your property can, or should, sell for. Some larger estate agents will have experienced valuers, working to a code created by the Royal Institution of Chartered Surveyors. The code is based on the following criteria:
- The age and type of property
- The accommodation available
- The fixtures and features of a property
- The property's construction and state of repair
- The position within the locality and the surrounding amenities available
- The tenure, tenancies, services charges or any other liabilities.
Consider getting a more detailed house valuation and check what kind of valuation your local estate agents are able to provide. Estate agents will factor in a market value, which incorporates the strength of the local market, demand and supply forces and the sale or rental price of other similar properties (comparables) in the local area. Remember, all estate agents are providing you with a valuation for free in order to try and win your instruction, which is why it is recommended you obtain three valuations. Everyone wants to maximise the sale value of their property, but an over-priced property may be difficult to sell, particularly if you are in a hurry to move.
However you decide to conduct your valuation, it is important that it is as accurate as possible. Most buyers request an independent valuation of a property they wish to buy, usually conducted by a chartered surveyor at the same time as the survey is carried out. They will therefore know if a property has been over-priced and this may influence their decision to follow through with the purchase, or to reconsider their offer price.
There are a number of techniques that are used when assessing the value of a property. These include the Comparable Sales Method, the Income Method and the Cost Approach.
The Comparable Sales Method
This method is one of the more common techniques used in estimating the value of property for sale and is based on the prices of similar properties that have been sold in the local area. It is also sometimes referred to as the Inferred Analysis. The principle of this method is that the value of a property is based upon what it is likely to sell for. This method therefore incorporates relevant market conditions and activity within a particular location.
A wealth of comparable property data is collated and characteristics, such as details of recent transactions and features of the property, are analysed. These include:
- The date of the transactions
- How the property was paid for
- How fast the transactions were
- The property size
- The condition of the property
- The location
- Building regulations
Once the data has been analysed, an appropriate price range can be attributed to your property, with properties most similar to yours getting a higher weighting in the analysis. You can search for properties sold in England and Wales right now on PrimeLocation and this will provide you with a basic indication of how much properties like yours have sold for in your area. This service is absolutely free for PrimeLocation registered users and can provide invaluable information if you are looking to achieve the best possible price for your property.
The Income Method
This technique is different from other methods, as it focuses on the intrinsic value of a house or flat to an individual. The principle is based upon understanding the current value of the property by assessing the future potential income of the investment (if the property is to be let, for example) or its potential resale value. As an example, if a buyer was thinking about acquiring a property to let, they would use this method to understand how much annual rental income they might expect from the property over the next few years and also how much the property's value might appreciate over the next few years in order to assess its value to them.
The Cost Approach
The Cost Approach to valuations looks at the replacement value of the property by understanding the cost of all the relevant components, such as the property itself and the land. Essentially, the principle lies in calculating the value of the land without the building in a free market, establishing the cost of reconstructing the property on the land and then deducting the value of depreciation that has occurred to the building in question.
The most common approaches to property valuations tend to utilise a combination of the Comparable Sales Method and the Income Method.
Valuation price versus value
Regardless of the valuation price you arrive at for your property, it will only be worth what a buyer is prepared to pay for it. If, for example, your property or road is highly sought after, in a market where demand is strong and supply is weak, you may find buyers are prepared to pay more than the marketed price to secure the property. Similarly, in a weaker market and in a less sought-after area, the opposite is likely to occur.
Valuations, however you obtain them, will only ever be a guide to how much your property might eventually sell or be let for. It is advisable, however, to use the professionals to value your property to maximise your chances of getting the very best price. Find an estate agent now on PrimeLocation.
- Related information
- how to buy a house
- how to sell a house
- how to choose a surveyor
- what your surveyor will do
- how to prepare your home for sale
Some information contained herein may have changed since it was first published. PrimeLocation strongly advises you to seek current legal and/or financial advise from a qualified professional.