There are many good reasons to get a real estate valuation. Most homeowners go through this step when they decide to sell their house, get a mortgage, or apply for a loan. A house valuation is a simple process on your part – you only need to tidy up and set an appointment.
An accurate house appraisal is valuable because it tells you how much your property is worth at the moment of valuation and how much it will be worth in the future.
Still, many homeowners hesitate to go through with this. It’s a popular opinion that mortgage lender surveyors undervalue properties for their financial gain, but that’s definitely not true for all of them. Besides, they are not the only professionals who specialise in house valuations.
Whether you need a mortgage or have a different reason for getting an appraisal, you have several options besides a mortgage lender surveyor. You can pay for a chartered valuer, use an online appraisal tool, or contact an estate agent to provide their educated guess.
Here’s why this third option might be the best one for your case.
What is a property valuation?
First things first – what is a property valuation, exactly?
A property valuation is when an expert estimates a real estate’s objective worth.
Property valuations are conducted mainly by chartered surveyors. In addition to being property value specialists, they are also certified for writing official appraisal reports. That isn’t the case with estate agents, who are, in many cases, better equipped for estimating property value.
Be that as it may, chartered surveyors, estate agents, and appraisal tools all look at the same combination of factors for determining property value. That includes the structural quality and general condition of the real estate, as well as the age, amenities, layout, size, and number of rooms.
The current state of the market is another key determinator, as it affects the price and demand for similar properties and other houses in your neighbourhood. Depending on the property, valuers often compare two or more houses with the same internal and external characteristics.
What forms of property valuation are there?
When a professional valuer chooses to weigh one property against the other, this appraisal method is called the sales comparison approach. There are five main property valuation methods, some more applicable to residential houses than others. They are as follows:
- Sales comparison
- Cost approach
- Income capitalisation
- Gross rent multiplier
- Cash-on-cash return
While sales comparison and cost approach methods are prevalent in cases where the property is residential and the owner is an individual, the other three methods are more fitted for investment property appraisals. Sales comparison is the only method that doesn’t use math.
Outside of these five approaches to property valuation, appraisals can take two forms – a traditional appointment with a professional valuer or a more recent online valuation.
When you book an appointment with a professional (be that a chartered surveyor or an estate agent), the valuer comes to your home for a walkthrough. You’re not under obligation to attend the appointment, but it’s always better when a homeowner gives a tour of the property.
The types of online appraisals vary from valuer to valuer. Some professionals will give their expert opinion based on your description of the property alone, which you’ll be asked to send via email. Others will want to see the property via Zoom or Skype before drafting the appraisal.
Online tools are an excellent alternative to property value appointments because they are fast, convenient, and free of charge. You type in the required information, and the tool does the rest.
Why you should get an estate agent valuation
Ultimately, why choose an estate agent over other available options?
Some of the most convincing reasons include:
Years of experience marketing and selling property
If you’ve been researching property valuations, you must have heard more than a few anecdotes where an estate agent and a chartered surveyor gave significantly different estimates for the same property. In many of these cases, an estate agent turns out to be correct.
There’s a simple reason for this. No, it’s not because surveyors are greedy.
Estate agents have more experience in marketing and selling property than any other field professional, which gives them a considerable advantage. Knowing the current state of the market better than anyone allows them to predict future value with great accuracy.
On top of being experienced and knowledgeable enough to recommend a fair and competitive price, most estate agents are willing to give you advice on how to increase the value of your house using quick and budget-friendly fixes like adding a fresh coat of paint.
Knowledge of local market conditions
Real estate experts differentiate between two types of local markets, depending on demand and competition. When there are a lot of home sellers but not many buyers, that’s called the buyer’s market. A popular market with only a few sellers is the seller’s market.
Whichever category you belong to, this seller-to-buyer ratio significantly impacts your home value. You might be in a position where you need to offer a lower price than your home’s worth, or conversely. If you don’t match your offer to the market, selling will be a challenge.
For instance, selling an overpriced house in the buyer’s market can take years.
Your estate agent knows everything about this. In addition to being informed, estate agents who have been in the game for long enough have a deeper understanding of how external factors like economic fluctuations affect local markets. It is crucial for accuracy.
Knowledge of what people value in a property in the area
The state of your neighbourhood is in direct relation to the type of your local market. The better the postcode, the higher the demand – the best neighbourhoods have fewer sellers and a large number of buyers. Good estate agents have all this information before they ring your doorbell.
You’ll likely choose a local estate agent to estimate your house’s value, as locals know the ins and outs of the neighbourhoods they live and work in. Without doing any research, they know how close the nearest bus stop, school, or mall are – all of which affect your property value.
There’s a good chance your estate agent has previously sold a house just like yours.
This kind of hands-first experience allows local estate agents to use a sales comparison approach with utmost accuracy. Your estate agent has probably been inside some of your neighbours’ homes. Neither can be said about the chartered surveyors sent by mortgage lenders.
More accurate than online valuations
Online valuations can never be as accurate as physical walkthroughs. Online tools provide a reliable DIY alternative for when you need a rough estimate, but some situations demand mathematical precision. As salespeople, estate agents know that every number counts.
Risk-free – no obligation to sell
If you’ve been wondering, “Why should I get an estate agent valuation when I don’t plan to sell?” Here’s your answer – an estate agent will give you an expert appraisal of your home even when you don’t intend to list it. You are not obligated to sell your house with your estate agent.
Free of charge
As a cherry on top, many top-of-the-class estate agents provide pro-bono appraisals. They offer their expert opinion for free because property valuations cost them nothing – save the opportunity to feel the neighbourhood’s pulse and get a deeper insight into the state of your market.
Why is real estate valuation important?
As previously mentioned, selling a house for the best possible price is not the only reason you need an accurate property valuation. We have briefly discussed mortgaging and applying for a loan, but this is only the tip of the iceberg. In today’s real estate, an accurate appraisal is always needed.
Buying and selling property
As a homeowner, you should know that real estate value and price are two different things. In an ideal scenario, you should be able to buy a property for a competitive price and sell it for more than it’s worth. In any case, you need an appraisal to tell you the fair value.
Renting a property
You might not be aware of this, but rent equals 6–10% of the property’s value. If you’re planning to rent your real estate and are looking for the best price to offer prospective tenants, you better book an appointment with a real property appraiser before you start losing on rent.
Mortgaging or remortgaging a property
Most mortgage lenders will send their chartered surveyors to give you an appraisal free of charge. In many cases, they either undervalue the property or add the appraisal price to the mortgage. In this situation, it’s always good practice to book your own local estate agent.
Obtaining a secured loan
When applying for a secured loan, you must cite the assets you plan to use to back the loan. When citing your property, the lender will need to know its current worth. As with mortgages, it’s always better to have your own estate agent conduct the house valuation.
Transferring a property title
A property title is transferred from one owner to another through a deed, a legal document that regulates the terms and conditions of the transfer. Since this is a formal process regulated by law, it must take into account the official house appraisal.
Taxation purposes
Properties are taxed differently depending on their type. Commercial real estate typically has higher taxes than residential, but there’s always a ratio that helps determine the tax by looking at the property value. It is an essential formula for all real estate investing strategies.
Compulsory acquisition
Of all real estate transactions, compulsory acquisition is the most unfortunate one. It happens when you declare bankruptcy and the lender takes your property because you have no other means of paying your debt. It goes without saying that you need an official appraisal for this.
Conclusion
An accurate estimation of your house’s worth is valuable in more than a few situations. The only question is whether you should leave this to a chartered surveyor or make an appointment with your local estate agent. Hopefully, we’ve helped solve that dilemma.
Estate agents have real-life experience and market knowledge on their side. In addition to that, they don’t mind providing a few expert tips that can help you increase your property value. Estate agents offer accurate appraisals without requiring you to sell and at no cost.