Who gets the final say in how much your property is worth?

Who gets the final say in how much your property is worth?

It’s not your property manager.

It’s not your real estate agent.

And it’s definitely not your mortgage broker!

So who does get the final say as to how much your property is actually worth?

As a property owner, even if you aren’t looking to sell right now, it pays to have an idea of how much your property is worth – after all it is among your most valuable assets.

The question of how much your property is worth is an important one

It affects your decisions about selling, buying a new property, releasing equity and refinancing.  

The more discerning question to ask, however, is whose opinion on the value matters most?

Bank managers, real estate agents, insurance companies and the property market can all weigh in on your property’s value and inevitably, they differ from your own opinion – often by tens of thousands of dollars.

It will be no surprise to learn that your own opinion on the value of your property carries the least weight.

Not only is it completely subjective, it is based on your emotions and your own personal preferences rather than that of the market.

Even when you do market research, you are more likely to pay attention to the data that suits you rather than figures that indicate negative market trends.

How can you ascertain ‘true market value’?

The true market value is what a buyer is prepared to pay and the seller is willing to sell at – the actual sale or purchase price.

Unfortunately, you can only find this value out if you go the distance and commit to the transaction.

More often than not, what you are instead able to find is an educated guess on the dwelling’s value, to enable you to plan your next financial step and indeed determine whether you do want to buy, sell or invest with your equity.

1. A real estate agent can offer an appraisal when you are looking to put your property on the market.

This appraisal is based on recent activity in the area and their knowledge of the market.

While it does give you an accurate opinion, it is still just that – the agent’s opinion – and it is likely to be a little on the high side so they can win your business.

2. A buyer’s agent can be priceless in this regard, as they not only have access to all the data in the area, but they are also working for you, not the seller.

This means they can be objective and will be most likely to give you advice that works in your best interests.

Keep in mind that if you plan to sell and buy another property, it isn’t just important to know the value of your existing asset, as you’ll need to know what the property you’re looking to purchase is worth as well.

3. Another professional that can weigh in on the worth of your property is an independent valuer. 

Property valuations are conducted by qualified property professionals who have no financial stake in the property’s sale or worth. They complete a valuation that stands as a legal document and can be used for insurance and litigation purposes down the track.

4. A bank’s valuation is another version of this, although it is performed by or for the lender, so it is often considered to be a little conservative to protect their risk.

This is the most important valuation you’ll need to know, as it is the only one that weighs in on how much money you are actually able to access related to that particular property.

In fact, whether you are buying, selling or refinancing, the bank valuation is the one that truly matters if you – or the other party – need a lender’s help to finance the venture.

A few things you need to know about a bank valuation:

• A bank valuation is conducted primarily to ensure that the mortgage amount doesn’t exceed the property value.
• They are ordered whenever you apply to your lender to purchase a property; want to refinance an existing loan; or want to access equity in an existing property.
• It is possible for a bank valuation to come back lower than the actual purchase price when you buy a new, off the plan property. In this case, the bank is protecting itself against risk and will require you to pay the difference in the valuation and purchase price, as well as your original deposit and Lender’s Mortgage Insurance (LMI).
• Being educated about the property market will ensure that you don’t waste money requesting a valuation at a bad time. For example, if you are looking to refinance or release equity and your property has lost value, you may wind up in a worse position than you started.
• You can contribute your own research to a valuation. Any market research that you submit to a valuer has to be taken into account, so be sure to research comparable properties yourself.
• Considered in a bank valuation is the size of the property; location; the structure and condition of the property; and council zoning.
• In order to get the best valuation result, you might want to consider renovations, upgrades or repairs. At the very least, present your property to highlight all of its best features.

There are many voices out there in the property world but the truth is, most of them don’t really matter.

If you are depending on a bank to help you finance your property investing dreams, and most of us are, then your lender’s opinion on the value of your property should weigh heavily on all buying, selling and refinancing decisions.

If you're looking at buying your next home or investment property here's 4 ways we can help you:

Sure our property markets are improving, but correct property selection is even more important than ever, as only selected sectors of the market are likely to outperform.

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About Brett Warren Brett Warren is National Director of Metropole Properties and uses his two decades of property investment experience to advise clients how to grow, protect and pass on their wealth through strategic property advice.