It may happen that a home sells for far beyond the expected price. However, generally you’ll see properties sell for around what is considered their ‘fair market value’.
With this in mind, there are a number of factors that influence the sale price of a house. There are also a number of measures that you can take as a buyer to get a rough idea of what that figure could be.
First up, you need to know what ‘property value’ actually means. The price that you’re trying to figure out is the ‘market value’ – thats how much the property would sell for today, in the current market. Usually, this isn’t a fixed number – it’s a range, affected by a number of factors.
It almost goes without saying that the vendor wants this number to be as high as possible and you – the buyer – want this number to be as low as possible.
So how do you figure out what you’re dealing with? Here are some strategies.
Research similar properties
‘Similar’ means different things to different people. In property terms, similar could mean the same number of bedrooms, being in the same school zone, a comparable level of quality, features and finish, and a roughly equal floor area in square metres.
To get started, you could look at properties within a radius of a few kilometres (expand this out if you’re looking at rural or regional properties). You’re looking for their sale price, and how much this increased from the previous sale. When you’re looking at sales dates, you might not want to go back further than a year, otherwise you’re probably dealing with different market conditions.
You should be able to find this information through a serious Google session. Once you have the figures, assuming you’ve got the sales history for the property you’re looking at, you should be able to figure out a rough range. As soon as you start your search, make sure you’re keeping a record of your findings.
If you’re buying off the plan, this process is just as important. It can be easy to believe that the listing price in new developments is ‘it’, but do the legwork to make sure that the price lines up with what the property is likely to be worth.
Talk to the experts
The vendor, the agent, even other people looking at the house, will all have ideas about its value. But they also may have a vested interest in you believing that the property is worth more than it is. So have these conversations but remember that you may have differing interests.
Once you have a rough idea about what you think the property is worth, you could take this figure to the agent and get their thoughts. Just remember that their job is to represent the vendor and get as large a sales price as possible.
Call in a professional
A professional property valuation will give you a clear idea of what you should be prepared to pay. This should cost you a few hundred dollars.
Over the course of a house search, this isn’t generally a viable option for each property that you’re keen on. It’s best saved either for the property that you’re sure could be ‘the one’ or for a situation where there’s a serious question mark over the value of the property. In such cases, a valuation could save you money in the long run.
Just remember that the valuation you seek on the property for your personal use is not the same as the valuation your lender will complete to assess your loan application.
To sum up
- Figuring out the value of a property you’re looking at means working out what the market value of the property is, or what it is likely to sell for at the moment.
- Doing the legwork and comparing the sales prices of similar properties is the best way to form a rough idea of the price bracket you could be looking at.
- You can enlist the services of a professional to give you a valuation. This is usually expensive, so it may not be practical for every property you’ll look at.
This ANZ article first appeared here