By Rich Harvey, CEO & Founder, propertybuyer.com.au
Buyers’ advocates know there’s a lot involved in delivering a property deal that represents a great outcome for a client. That said, the most universally recognised measure of a deal’s worth is normally price.
While appraising property value is more complicated than many people imagine, it is vital that you are as accurate as possible when determining the figure. In fact, at Propertybuyer we don’t seek just accurate appraisals, we strive for immaculate appraisals.
Here are four characteristics of an immaculate appraisal which must be understood and applied to create an unflinching assessment of value.
Comparable evidence
To precisely assess the value of a property, you must rely on comparable evidence that’s been fully vetted and forensically analysed.
What do I mean by all of that? Well for starters your comparable evidence must be very recent and highly similar to the property you are assessing. This is both in terms of location and physical characteristics. It must also be “arm’s length” so you know it’s reliable.
Sales must be recent so that they take into account the prevailing market landscape. Using property sales more than six months old (in some instances, more than three months old) is telling you what your property was worth back then, not right now.
In addition, similarity in location and style of home is key.
I’ve heard it said that the best evidence is usually a sale of the home itself. The second best is of the home next door. Using sales in close proximity allows locational factors such as schools, retail, cafes and general accessibility to be factored in appropriately. Finding like-for-like homes in terms of land size, building type and age, outlook, aspect and so on reduces the margin for error when running your analysis.
Experience in comparable analysis
Together with choosing the right sales evidence is applying the aspects of comparison appropriately. This skill is honed by the experience of doing assessments day after day across particular locations and within certain property types.
Time spent practicing this skill allows the buyers’ advocate to view a property through the eyes of a potential purchaser, and appropriately discount or elevate value based on the home’s various characteristics.
For example, as associate and I were discussing how important inground pools are to many buyers in Brisbane close to CBD. The climate and lifestyle lend themselves to weekends around the pool, and purchasers in these zones often have a good size budget. As such, a pool can add tens-of-thousands to the right style of home.
Yet take that same pool to an outer suburb where there’s unstable soil compositions, buying budgets are tighter and residents have less desire to deal with pool maintenance costs. In these localities, inground pools add very little value. In fact, my associate mentioned a few suburbs where they reduced the value! It’s the self-same improvement, but a completely different influence on property value.
It takes experience to know how to analyse all of these factors appropriately.
Comprehensive due diligence
Some of the aspects that influence value are not all that obvious.
If a buyer is committing to spend hundreds-of-thousands, if not millions, of dollars on a home then it behoves you as a professional to know as much as possible about that property – including the “unseen” elements.
This will include town planning limitations and strengths. I want to know about the zoning and overlays. Are the improvements approved? Is there potential to redevelop or extend?
Also, where do the services run? Do they hinder further construction on the site?
Are there encumbrances on the title that will impact the buyer too? For example, I know of some properties where there’s an invisible but defined area above the existing home called a “volumetric lot” which can stop it from being raised up (usually because it will impact a neighbour’s view). This can have a massive impact on the property’s value.
Exceptional market comprehension
It’s essential to have an intimate understanding of the market you are operating in when assessing value. The way properties are sold and the how buyers perceive them can vary widely depending on price point, location and property type.
A standard home on an average block in an area that sees a high property turnover should perform in a predictable way on the market.
In contrast, however, there might be a property in a rural residential location where transactions happen more rarely. Also, the types of homes sold there are varied – from contemporary architectural abodes through to colonial renovators. There will also be differences in their ancillaries. Some may have stables and horse yards while others have a small building envelope with an infinity pool and expansive views.
In this rural residential location, you must also factor in how extended marketing periods come into play. Sellers here are used to letting their listings stretch into weeks or even months as they wait for the right buyer to come along.
Then there are considerations such as what to pay when markets are rising quickly. While sales evidence suggests a certain figure, experience tell you it’s worth outlaying a small premium now to avoid a larger premium later.
An intimate understanding of the market you are assessing in – and exactly how its performing on the day you do your appraisals – is crucial.
When it comes to valuation, the mechanics seem relatively easy to learn, but they’re difficult to master. Experience through conducting thousands of assessments is what sets a professional – like a buyers’ advocate – apart from everyday Aussie purchasers. We know how to apply the right components, so the appraisal isn’t just accurate… it’s immaculate!
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