Whether you’re planning on selling your home soon, refinancing your home loan or are simply curious about how much your home is worth, appraisals and valuations can provide a lot of insight. We’ll explain what the difference is between a property appraisal and a formal valuation, as well how to increase your home’s value.
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A property appraisal is essentially an estimate of your home’s value conducted by a real estate agent. Agents will compare your property with others in the area by looking at recent sales data and features in your home to give you an insight into how much your property could sell for. Think of an appraisal as a guide figure, carried out by someone with a lot of local real estate knowledge.
Most real estate agencies offer a free property appraisal service. This is useful to get in case you’re planning on selling your property soon as it’s nice to know how much you might get. However, it’s important to stress that a property appraisal is just an estimate — they’re not definitive and have no legal standing.
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A property appraisal can provide you with a solid indication of just how much your property could sell for. This can help get you started in your search for a new home.
When getting your property appraised, it’s important to find a local real estate agent who has a lot of knowledge of the local area and recent sales. If you use a real estate agent who typically works in another area, they may give you an unrealistic estimate.
If you want to know exactly what your property is worth, you’ll have to get a formal property valuation report. A specially trained, qualified valuer will come to your home and complete the complex task of assessing your property. They consider multiple factors, including:
Contrary to property appraisals, a valuation won’t account for stylish features and street appeal. Something that is important to remember when carrying out renovations is that the price you pay to renovate won’t necessarily be reflected in the home’s value.
For example, if you spend $20,000 renovating a bathroom, it doesn’t mean that your home’s value will automatically increase by a minimum of $20,000. Just because your property has a shiny new bathroom, it doesn’t mean that buyers would choose yours over a cheaper, almost identical property down the street which has an older bathroom.
Property valuations don’t dictate how much a property will sell for. Homes can sell significantly above or below their market value based on interest, emotions and competition (or lack thereof).
There are a range of situations for when getting a property valuation is necessary. These may include:
You can also get a property valuation at any time, if you are curious about your home’s value and want an accurate figure.
A property valuation can cost between $300 and $600, but it will depend on your location, property size and other factors. If you are in a very rural area, it will often be more expensive to factor in the inconvenience of the valuer travelling. On the other hand, a property appraisal will usually be free.
Many lenders will cover the cost of the property valuation if you are refinancing or applying for a home loan.
Since property appraisals are estimates, they are often conducted for free by real estate agents. For an instant look at how much your property could be worth, you can use an online tool to get an estimate.
A property valuation can only be carried out by a professional, qualified valuer who has undertaken the education and training to provide an accurate written report. A valuer will usually work independently, but often on behalf of banks and lenders.
Home appraisals can be accurate, but often they are a little off the mark. Some real estate agents may appraise a property more generously to encourage a potential vendor to list the property through that agent.
Ultimately, the property market can be unpredictable. A home could sell for more than its appraised value if there is unexpected interest in it, and potential buyers are willing to stretch their budgets. The opposite can also be true. If a listed property is not getting much interest, you may be forced to accept a lower offer in order to sell.
In a way, it can be helpful to view a property’s value as how much someone is willing to pay for it. An appraisal or professional valuation may not mean too much to you as a vendor if you are only receiving low-ball offers below these numbers.
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Check out our table summarising the differences between a property appraisal and a valuation:
|Property appraisal||Property valuation|
|An estimate of your property’s worth based on recent local sales, home features||A detailed report of a property’s value in the current market|
|Usually conducted by a real estate agent||Conducted by a qualified valuer|
|Typically requested by potential vendors to get an insight into their home’s position in the local property market||Typically required for property settlements, securing finance from a lender, calculating equity and in deceased estates|
|Will usually come at no cost||Usually costs between $300-$600 but may be covered in some circumstances by mortgage lenders|
|Appraised value will not always be reflected in the property sale price or valuation||The official property value may not be reflected in the sale price|
|No legal standing with no guaranteed accuracy and should be treated as a guide for pricing||Can have legal standing|
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There’s a lot of factors that you won’t be able to alter. Things like location, heritage status and land size are (for the most part) fixed. But, you do have control over the property’s presentation and possible improvements.
Here are some tips for increasing your property’s value:
Find out what else can increase your property’s value:
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The information in this post is general in nature and should not be considered personal or financial advice. You should always seek professional advice or assistance before making any financial decisions.
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