The Price is Right
In the property industry, knowledge is power, especially when it comes to buying or selling. Too often both buyers and sellers have no idea of the true value of a property, which puts them at a disadvantage during the negotiation process.
Getting the Value?
Market value is generally defined as the price a willing buyer would pay a willing seller for a property in its present condition. The two most important factors that a property consultant will consider when valuing a property are: what price a similar property has recently sold for; and what price a similar property is currently being advertised at. You should do the same.
Set Up Comparisons
By examining recent sales of at least three properties in the same geographical area that are comparable in building style, size and construction, one can begin to get a good understanding of a residential property’s market value. Comparable sales should include characteristics similar to a given property, such as lot sizes, square metres, home style, age and location.
Other Value Added Additions
Some properties which seem similar, might not be selling for the same prices. There could be a number of reasons for this, including: better location; additional parking space; a larger garden; newly fitted bathrooms or kitchens; or a better view. You do not need to know exactly how much extra value any of these things add, you just need to be critical, objective and realistic about why one property would achieve a higher or lower selling price than another property.
Circumstances Tell All
However, it is important to consider the circumstances of property sales. Perhaps the seller was desperate to “unload” the home, or the buyer paid much more than the asking price because there were other interested parties. By keeping tabs on the property sales in your area, you can track how much a home is listing for, how quickly the home sells, and at what price.
Your Local Market
In addition to looking at properties sold in your target area, you need to look at properties that are for sale. While asking prices are not sold prices, it will give you an idea where your local market is heading either up or down. Also keep an eye on supply and demand: The number of homes for sale versus the number of buyers, and how quickly the homes in your area sell.
Choose the Right Agent
Before deciding which property consultant to approach for a valuation, do your research and be sure that you are getting the best agent. This will be someone who knows the local area and has knowledge of how the market is performing in the current climate. Typically, such an agent will be able to provide you with information on properties that have sold in the past 6 – 12 months, and be able to identify them. He or she will also have information on properties that have not sold for a period of six months or longer, and for what reason. Ultimately, this person will guide your decision making process, so make sure that they are worthy of your trust.
Story by John Roberts (First Published in REIM: http://www.realestateinvestormag.co.za/)
