What to Know About Real Estate Valuation

You might think that property value is the same as the price, however, the price and value of a property are not always the same. There are many factors that affect a property’s value and sometimes listing prices do not show the real value of a property. 

There are houses that might be overpriced but there are also properties that are underpriced. If you do not know that value and price are different, you might easily fall into buying an overvalued property. Read this article to know more about real estate valuation and what it means for the buyer.

What is Real Estate Valuation

The value of a property isn’t the same as its price. For example, the actual value of a property is $300,000 but the seller would like to sell it for $350,000. For inexperienced buyers, this might not be an issue as they don’t have an idea of what the actual value is. On the other hand, an experienced buyer or investor can find a way to verify its value and eventually learn that it isn’t fair pricing. They can negotiate with the seller or he/she decides whether he/she will still proceed with the purchase given the current price. 

In some cases, buyers proceed with purchasing these properties due to various reasons. Some investors seal the deal because they see the property’s potential to increase its value.

How does a real estate property get its value? In the next part of this article, we’ll discuss the various factors that influence the property’s value.

house valuation

Factors that influence property value

1. Size

Knowing the value of a property relative to its size is simple. In the same area, a four-bedroom property should be more valuable than a one-bedroom property, and a 500 sqm lot should be more valuable than a 200 sqm lot. It makes sense that a smaller property should not be priced more expensively than properties that have more space.

2. Location

Things are different once you put the location into consideration. Generally, properties in cities like Sydney and Perth are more expensive than properties in outer suburbs. A small studio-unit in the city centre might be worth more than a three-bedroom house in the suburbs because of the demand in the area and because that area is more desirable to live in.

3. Condition

The condition of the house also plays a big factor in its value. However, this can also be a great opportunity for sellers to increase their property’s value in a short amount of time. Renovations, home maintenance, and improvement are the main ways on how to add value to the property. If you are a homebuyer, you must inspect the property for issues such as electrical problems, plumbing issues, roof damage, and more.

4. Supply and Demand

Real Estate value changes with the supply and demand in a specific area. In places where the is a lot of supply or houses that are up for sale but not enough buyers, the value goes down. However, in places where there is not enough property to meet the demand of buyers, the value goes up. Simply put, the property value goes up with demand. 

5. How the property can be used

Commercial properties are valued differently than residential properties. Laws and restriction is also a factor here as if a residential property cannot be turned into a commercial property, its value and desirability can decrease depending on a buyers’ intent.

why is real estate valuation important

Why is Real Estate Valuation Important

Valuation is important because each property is unique. Two houses in one street, even those that look identical, can be very different in terms of condition, interior, and presentation. With these factors and those that are previously mentioned, their value will differ accordingly.

As an investor, real estate valuation will also let you know how much you should reasonably pay for the property, how much you can borrow to purchase the property, how much you can sell the property, and in cases wherein income is the investment goal, it will let you know how much income the property can generate.

Since valuation is a crucial part of the property buying process, it is best to consult experts especially for those who are new to investing or home buying.

Consult the expert

When buying a property, it’s better to ask help from licensed valuers for a more accurate property valuation. In addition, your buyer’s agent can help negotiate with your seller for the right amount. They can both help with assessing if you are getting a house for a lesser amount than its actual value. 

Don’t be fooled by the price tag. You need to make sure that you’re paying out the right amount of money and that you’re getting your money’s worth. 

With the vast experience of the buyer’s agents of Buying Perth Real Estate, they are knowledgeable enough to provide you with the right information of the property you are planning to buy. Contact our experts at 08 6215 0200 or send an email to clive@buyingperthrealestate.com.