It is of utmost important to be well informed when committing to a property transaction. Always be aware that not all estate agents have your best interests at heart!
Estate Agents are in the business of facilitating the selling and buying of properties. The asking price an estate agent recommends might be hugely over-inflated because of their desire to earn a larger commission on the sale of the property. They may also encourage a seller to accept a below-market offer in order to secure a quick sale. It is highly recommended that a professional property evaluation is done on your property and that you not rely solely on an estate agent’s opinion.
If major defects are uncovered you might even think again about your purchase, or you could be in a position to re-negotiate the price. A home is a massive investment and it is worth following the Property Valuation Process
at as early a stage as possible, thereby saving you a lot of hassle later on.
Basically, there are two types of valuation, namely:
- Informal Opinion; and
- Professional Opinion Valuations Reports
Informal Opinion means that there is no legal requirement for their opinion to be within the parameters of the law.
Professional Opinion means that there is legal requirement for their option to be in line with applicable regulations and associations e.g. SACPVP.
Property Valuation can be better understood from the following theoretical approaches, namely the Comparable Sales Approach, Income Sales Approach and Cost Approach, each of which will be discussed briefly hereunder:
The Comparable Approach:
estimates the value of a house by comparing it to the prices of similar properties sold in similar locations within a recent period of time.
The Income Approach:
the present worth of a property is estimated on the grounds of projected nett income in the future, e.g. rental fees and re-sale values.
The Cost Approach:
estimates the replacement value of a property by analysing the cost of its components.
A Property Valuation will be required for the following reasons:
Why do you need a Property Valuation?
- To determine the insurance rebuilding cost
- For rental value determination
- To determine the value of property register
- For municipal valuation purposes
- For market value purposes
- As a Seller, this will form the basis for your “Asking Price”
- As a Buyer this will form the basis upon which you decide whether a property is worth its “Price Tag” or not.
- As a Bank/Financial House, this will form the basis of determining whether the property is worth the value of the bond that has been requested
- As a Property Owner, this will form the basis upon which to lodge municipal valuation objections
So basically, a valuation is not the estate agent simply telling you that a couple of similar houses down the road are also for sale for a similar amount. Appraising the value of a property is a complex matter where many factors have to be taken into account. There is so much more to Property Valuation than has been mentioned here, but the above is just a small framework of the greater process, in order to assist you moving forward.
To get Expert Valuation Reports or Opinions, please click here