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Top 7 Tips on How to Value a House

By 11/06/2019 No Comments

Understanding the value of a house, be it one you own or one you are looking at purchasing, is vitally important. You will want to know how to value a house for insurance, understand where you sit in the negotiation process, how much equity you have, or how well your investment is doing. Knowing how to value a house helps you to gain this information.

Urban.com.au have compiled these seven tips on how to determine the market value of property. Once you understand how to calculate property value, you will be best positioned to determine how to value a house for sale.

Tip 1: Have an appraisal done by a professional

Top 7 Tips on How to Value a House

We’ll get the obvious one out of the way first. The surefire way to calculate property value is by hiring a professional to evaluate your home. We’ll go into some more cost-efficient ways to determine the market value of property in the following points, but as with everything, you’ll get the best answer if you are willing to pay for it.

You will notice that an appraisal is a required step in the mortgage application process to help determine how much you can borrow, but you can hire an appraiser at any point to get you this information.

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A professional appraiser can even give you a value for a date in the past if required as you may need that information for tax purposes or you can determine the current market value which is a more common request.

Appraisers will give you a property value estimate based on:

  • The market in the location of the property
  • The current state of the house and land including any improvements
  • A comparison in sales, cost, depreciation and other relevant elements in the market for similar properties

Tip 2: Try online valuation tools

Top 7 Tips on How to Value a House

A simple search online for a ‘how much is my house worth calculator’ is a much more cost-efficient way for how to value a house for sale, however a little less exact than point one. Still, it’s a great place to start and a handy thing to do if you are considering buying a particular property as well.

Many financial institutions offer automated valuation models which take into account property transfers, tax assessments, and deeds of ownership, plus the current state of the market, recent sales and listing prices, to predict the value of a property in a particular location.

Keep in mind that businesses or financial institutions have created these tools marketing and lead generation purposes and are using limited data to provide answers which is why the accuracy isn’t as good as a professional report, but you get what you pay for.

Tip 3: Research similar properties

Top 7 Tips on How to Value a House

A great way to get a very realistic figure is to perform your own research on similar properties in the area and see what they have sold for, or what their asking price is, recently. The sale value of comparable properties is something the online tools use as well, and it is a simple way to get some good quality data.

One thing to be aware of when determining market value via this method is that the property next door may not be comparable based purely on location. You need to take into account size, condition, and any upgrades as well. For this reason, you may want to look for similar style homes or apartments in a wider radius rather than just sticking to your street or block.

The best steps to handle this yourself are:

1. Find recent sale prices of comparable houses nearby

2. Make a note of listing prices, but keep in mind these are not as realistic as sale prices

3. Three comparisons are the minimum number you’ll need for an accurate picture

4. Adjust for any significant differences between the properties; you may need to account for more bedrooms or an older interior

5. Look at the highest and lowest figures and place your property somewhere in the middle

It is important to note that all of this will only give you a ballpark figure, but it is a great place to start to get an idea on what your property is worth or to ensure that you are buying right when it comes to investments.

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Tip 4: Use a comparative market analysis

Top 7 Tips on How to Value a House

To save you some time on the last point, you can speak to local real estate agents about a comparative market analysis (CMA). Once again, these will not be as detailed as a professional appraisal, but it will give you a small headstart on getting a lot of the required information yourself.

This information is handy for your selling preparation or figuring out your ballpark buying figure. The analysis is usually based on the agent’s evaluation of the market for listing purposes. You may be able to get one of these given to you for free, but once again it is important to note it will likely be a marketing tool, and the agents are looking to impress you with how much they will be able to sell your home for, so the accuracy of these figures should not be taken as gospel.

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(Even if you’re not a math whiz, don’t have a ton of extra cash, and busy juggling life & kids. )

Tip 5: Avoid these mistakes

There are some common mistakes that can be made by people who are trying to calculate property value without professional help, which should be avoided at all costs.

Keep the following points in mind during your process:

  • If comparing properties that are currently on the market, remember that they have not had an agreed price so are really only listed as what the seller is wanting, and this may be an unrealistic expectation. Only compare your property to properties that have sold
  • Any advice from an agent may be based on other offers on the property or a particular price that they want the property sold for
  • Emotional attachment often makes people believe their home is worth more than it actually is, the same can happen with buyers who fall in love with a property, offering more than it is worth. It’s always best to leave emotion entirely to the side
  • Market research should also involve going to open homes and auctions
  • Brand new properties come with a higher price, so compare with older more established locations as opposed to off-the-plan developments
  • Always ignore the media when the claim prices are going to plummet or skyrocket, this is not a trustworthy source of information

Tip 6: Take note of this useful data

Top 7 Tips on How to Value a House

There are plenty of ways to figure out how to value a house for sale with a range of useful information about the property market.

The following are the key pieces you’ll want to gather to ensure you have everything you need:

  • Median house prices for your particular area
  • Information about any new developments in the area
  • The auction clearance rate which is the percentage of auctions resulting in a successful sale (including before or just after the auction)
  • Discounting percentage which is the average discount below the listing price
  • How many days property spends on the market

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Tip 7: Do what you can to ensure a good valuation

Top 7 Tips on How to Value a House

While this final tip isn’t necessarily about how to value a house, it is an important one for getting the best result out of a valuation.

A low-ball valuation can your chances of refinancing, and there are a few things you can influence to add a few more dollars onto your figure, including:

  • Ensure the home looks fantastic, spruce up the garden, repair anything that is broken, give the place a good clean and even a new paint job if you have time
  • Make a note of any unseen improvements like new wiring and underfloor heating while also pointing out improvements in your area like a new playground on your street etc.
  • Let the valuer know about similar sales nearby, they should, of course, know this but it doesn’t hurt to remind them, especially if they have been for high amounts
  • Prepare any recent council rates notices or land tax valuations
  • Let the valuer know if you are planning renovations and provide architectural or building plans

Understanding the value of your house

Top 7 Tips on How to Value a House

The above points will allow you to obtain the all-important information on how much your home is worth. The reason why you are gathering this information will dictate the level to which you will go to get it.

For example, if you are looking at selling or refinancing, then a professional valuation will likely be required. If however you are just curious or projecting some future plans, then the free DIY ways will suffice.

Either way, understanding the value of one of your most significant assets, is always a good thing, especially if you wish to use the property as a rental, to know how your investment is tracking.

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