What is the real value of your property?
THIS year the importance of valuing a residential property accurately prior to buying or selling it has become more and more evident, and yet, inaccurate valuations are regularly being done every week.
This is according to Schalk van der Merwe, co-franchisee with his father Johann for the Rawson Property Group’s Somerset West franchise, who says sellers in particular should always ask their agents to explain and justify how they have arrived at the valuation they have submitted.
“If they cannot do this in a totally convincing way with adequate backup data, it is likely that they are not true professionals and their valuations cannot be relied on.”
He says agents working in big, well-branded property groups almost invariably have access to reputable data banks which provide them with accurate statistics which, in turn, greatly simplify the valuation process.
In some of the smaller agencies, however, Van der Merwe says they do not have access to accurate market information and therefore are prone to making mistakes.
Looking back on the last decade of property marketing, van der Merwe says that before the recession, most banks and some agents relied on what is known as “desktop valuations”.
With these, the various criteria relating to the property and its area are considered for the assessment, and an average price is then arrived at. Additions or subtractions can be made to this number for negative points or a specific bonus, such as a beautiful view or close proximity to a good school.
Van der Merwe says this valuation system rapidly became redundant when in the 2008 to 2010 downturn home prices fell 10% to 30% below their previous highs.
Now, he says the property market is again in a normal trading phase, albeit slanted to the advantage of the seller, and banks, together with some agents, are again making use of desktop valuations.
These can be misleading because recent price rises have been rapid, often in excess of 10% annually, and the desktop valuers’ data is almost always related to the previous quarter, which means that by the time a valuation is made today, it is already out of date.
Van der Merwe says his team and himself have found that to get a truly accurate valuation, it is necessary to use all four of the recognised valuation systems.
He says these estimate values are based on:
1. Accepted capital growth formulae.
2. The replacement value of the home.
3. Recently achieved sales of similar homes in the area.
4. The current asking prices of homes for sale in the area.
Van der Merwe says this last criterion should take into account how long the home has already been on the market. Right now in the Helderberg, he says correctly priced homes are selling in less than 27 days.
If, therefore, the home has “stuck” on the market for 40 days or more, there must be something very wrong with it, or its price is almost certainly too high and should be discounted.
Van der Merwe says his team, focusing on comprehensive valuations, is now asked to do 20 to 30 per month. These come not only from potential sellers, but also from those planning to rent the property out and achieve a respectable return in relation to its current value.
In some cases, he says clients are trying to assess what their Capital Gains Tax will be if and when the property is sold. This relates mainly to second homes, primary homes being given tax concessions.
Van der Merwe says first-time home buyers have been particularly prone to over-bidding for the homes they want.
“There is absolutely nothing wrong with bidding high for a property you really want, as long as you recognise that you are acting emotionally and not necessarily rationally, and are prepared to wait for market values to catch up with the price you have paid.” -Property24.com