Property appraisal vs. valuation

Posted on Friday, May 6, 2016 - 15:33

A real estate agent has thoroughly examined your property, and all you could hear were words of praise. Of course – you’re over the moon. However, that lasts until you receive your valuation report, and it’s nearly $70,000 lower than the initial sum quoted by the agent. 

Hence, you come to ask yourself – what is my property really worth? Is there a way to settle that?

You should know that this kind of issue is common in the real estate market. At least that’s what Michael Brock – president of the Real Estate Institution of SA – affirms. In his statement, he outlined that most Australians don’t differentiate these two concepts – appraisal and valuation. This article is meant to inform you in this direction.

Defining valuations

Brock points that an estimate can only be done by a professional, who has proper training and education in this field. This way, you make sure that he/she considers all the features and underlying issues of the property. He also added that a valuation is a complicated process, and isn’t something one can complete overnight.

A reliable, formal assessment made by a registered professional will consider the following characteristics:

  • Primary features of the home
  • Local council zoning
  • Location
  • Building condition and structure
  • Encumbrances on the property
  • Possible structural or building faults

Typically, a valuation costs somewhere between $300 and $500. You will be handed in a report stating the accurate value of the property, as well as detailed explanations on what determined the value.

Why do I need a valuation?

Such a valuation is a necessity in the case in which you require a definite value for your property: when dealing with a property settlement, or determining the value of a deceased’s estate, or trying to obtain finances from a particular institution, so on and so forth. In the case of a process solving a conflict, such an official declaration might be needed as well.

Defining appraisals

Appraisals are designed as guides, and real estate agents may deliver them. These assessments are typically estimated according to factors such as recent sale prices, local area prices, and others. By definition, Brock outlines that such an appraisal shouldn’t be conveyed as an estimate of price. In other words, they don’t have legal importance; they’re just offered for pure orientation. Typically, they are requested by vendors who want to examine the real estate market.

Why do I need an appraisal?

All this information leads us to the question – why do I need an appraisal? For starters, if you intend to sell your home, an appraisal from a qualified, reputable real estate professional can give you a clear outline of the property’s approximate worth. Nonetheless, make sure that the real estate agent you contact is acquainted with your suburb. If one doesn’t know the conditions in a particular area, the appraisal may not be accurate, and such an outcome is to your disadvantage. The bottom-line? If you’ve made your decision to sell, go for an agent that is familiar with your local area.

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