Property Appraisal – What is the Value of Your Property
What is your property worth? Find out more about property appraisals and real estate prices in South Africa
If you are looking to buy or sell a property, knowing its value is obviously a central consideration. It’s important for the seller to quantify a reasonable asking price and serves the buyer in the decision-making and negotiation process. There are other times when knowing the market-related value of property is useful and this is known as a market appraisal or comparative market analysis. Other factors include:
- Assessing the potential of an investment property. If you are looking for investment property, a professional property valuation may provide insights for a thorough investment analysis. This gives you empirical data to examine and evaluate before making any decisions. Qualified property valuators, who may provide valuations for finance houses and municipalities, offer a specific service for a professional fee.
- Real estate financing. Affordability lies at the core of every real estate transaction. Knowing a property’s value is a fundamental component in addressing the question of affordability (you can also use helpful online tools like the bond calculator and affordability calculator from Property.CoZa).
- Working out costs associated with the property. The value of a property has a bearing on costs such as insurance, levies, where applicable, rates, and taxes.
- Identifying potential improvements. If you want to maximise the value of your property, that process starts with understanding its strengths and weaknesses. A property evaluation by a property professional is a good first step in finding out what these are and what elements of your property provide room to improve. From here, you can create a roadmap for renovations that really make an impact on the value of your home or property. A real estate professional can also give meaningful advice around whether it would be prudent to rather sell or refinance your house at the time.
- Future planning around the property you own. By conducting a market appraisal every so often, you are given a relevant context from which to make decisions around property ownership. Managing Director of Property.CoZa, Sandy Walsh, recommends that homeowners conduct a market appraisal every three to five years. “Property ownership should be viewed as a long term investment, and some properties appreciate faster than others. Of course, this depends on the location and desirability, and it is certainly worth being up to date on the value of your property in the market,” says Walsh. “Our property professionals are always willing to provide a free market-related appraisal.”
- Determining the right time to sell. Many factors play a role in the best timing for selling or buying a house – and value is one of these factors.
Using a Real Estate Agent: Is it Worth Getting a Property Appraisal?
Believe it or not, the value of your property is a science. It is possible for you to conduct your own real estate market analysis for your home valuation. In fact, you should conduct independent research to bolster the figures received from property professionals. However, at Property.CoZa, we recommend always partnering with a property professional to get a market appraisal.
One of the reasons for this comes down to sentimental value versus monetary value. It is sometimes hard for homeowners to be completely objective in assessing the various factors that go into a comparative market analysis (CMA).
Most importantly, however, a comparative market analysis relies on a range of data and knowledge and understanding of the property market for accuracy. The best and only way to ensure that the figures have been correctly and accurately quantified to result in a reliable estimate is to enlist the help of a property professional. Additionally, conducting a CMA should not take the place of a formal appraisal when it comes to things like refinancing.
Beyond the market assessment, without question, having a real estate agent by your side during the buying and selling process is tremendously helpful when it comes to setting and negotiating the purchase price.
What Affects Property Value?
These considerations include the following – many of which are evaluated in the creation of a comparative market analysis:
- Location. Broadly speaking, this refers to the city in question, but this should be brought down to a granular level, including the neighbourhood, and positioning within the suburb. The latter includes its proximity to amenities like schools, shops, and hospitals. It also looks at levels of desirability throughout the neighbourhood, accounting for things that would constitute nuisance too.
- The property itself. During a comparative market analysis, a real estate professional will conduct an on-site assessment to consider things like the layout of the property, its age, its usable and occupiable space, condition, improvements, features, fixtures, security features, views, and landscaping. They will also look at the last available selling price of the property in question.
- The property market. The property market has a bearing on the value of a property. This is influenced by things like demand – the inclination towards ownership out of desire or necessity, matched by the financial means to enforce ownership. This, in turn, brings things like interest rates and political drivers that alter the economy and cost of living to the fore. It is also influenced by scarcity – how many similarly placed properties are available at the time of the valuation? Supply and demand is looked at on a national and local level. Transferability is another thing to consider – the ease with which a property can change hands.
- Comparative pricing. Sales prices tend to follow neighbourhood trends. Comparative pricing – what a neighbourhood property sells for – plays a role in affecting value.
What Factors are Considered in a Property Valuation?
What is a comparative market analysis? What does a real estate market analysis include?
A powerful tool in estimating the value of a property is to look at comparative sales on properties that were sold within close proximity to the property in question and with similar features. A real estate professional conducts a comparative market analysis that looks at the selling price and value of similarly positioned properties, as well as market factors.
While there is no template for a comparative market analysis, it is common for this report to include the following information:
Location and comparables.
A comparative market analysis usually compares three to five properties of similar age and location sold within a year of the property valuation. As the property market changes regularly, for the purposes of the report, the more recent the sale, the more valuable the data. Comparable properties should be as closely aligned as possible in terms of placement, age, and features.
Property details. The report will take into account detailed information on each of the comparables including things like size, floor plan, square footage, selling price, etc. Terms and conditions of sale will be closely examined and adjustments made accordingly.
Calculated differences. The real estate professional will consider all differences between comparable properties and the subject property that make one superior over the other. The report will ascribe a value to the differences between the property in question and the comparable properties and adjust the value of the comparables accordingly.
Sold price per square metre. The final analysis typically works out the value of the comparable properties per square metre after adjustments and then combines them to land on an average.
Market value. The report will finally propose an estimate value based on this collection of factors, as well as current market-related information. For enhanced accuracy, comparable properties are only selected from those that were sold on the open market without the presence of unusual market conditions.
As you will infer from the above, there is a level of subjectivity that goes into making value adjustments during this comparative process. Generally speaking, a property professional will give preference to those comparable properties requiring the least amount of adjustment.
The Difference Between Market Value and Selling Value
As noted above, one of the elements considered in a property valuation is market forces. The market value of a property is the most likely selling price the property will bring on an open and competitive market. Market fluctuations affect the market value of a property, which is influenced by things like supply and demand.
“The selling price is the amount the property attracts when the property is presented to the market. It does not always reflect the market value, and at the end of the day it is the buyer who determines the price when they make their offer to the seller,” says Walsh.”
Important Things to Remember About Property Valuations
Are all the variables considered?
The most comprehensive comparative market analyses look at historical, current, and expired listings for the sake of completeness. While a professional comparative market analysis comes highly recommended, complement this exercise with your own research. This manual process can sometimes bolster your property professional’s efforts.
Your research is no replacement for a professional property appraisal
With a range of property-related online tools and information at your fingertips, the internet makes conducting your own analysis easier than ever. Remember the advice above, however. There is a possibility that you have missed certain considerations and it’s always a good idea to team up with professionals.
This comparative market analysis expires
Like quotes, a market appraisal is only valid for a period of time, albeit a lot longer than a normal quote for services. A CMA should serve a seller for at least a year or two; however, market influences should always be taken into account and this process should be repeated before placing your property on the market.
Property Simplified With Property.CoZa
Setting the right price for your property is a great starting point in securing a sale and preventing long listings. At Property.CoZa, whether you are selling a property, buying a property, or simply need the help of a reliable property specialist, we’ve got everything you need to guide you through the property process. Visit Property.CoZa to explore our property solutions and contact us for more information.