Valuation FAQ
I know what I want for my property, so why do I have to get a valuation?
This is a fair question, but it masks a fundamental misunderstanding about the real estate sale process. Knowing what you want for your property is not as important as knowing what a purchaser will pay for it, and this is what the
valuation
is all about. If the
valuation
tells you that the property is worth $200,000 but you will not sell it unless you can get $300,000 there is obviously a problem. The
valuation
assists an intending vendor to determine what a purchaser is likely to pay for the property, and this in turn allows the vendor to determine whether the property should be put on the market at all.
An estate agent valued my property, why can't I use that?
There is a
conflict of interests
when an
estate agent
advises a vendor as to the
value
of a property. The
estate agent
stands to win a huge
commission
if the vendor sells through his estate agency, and the temptation to impress the vendor with an attractive
appraisal
is often overwhelming. And then there's common-sense consumer's adage, "If it costs nothing, it's worth nothing."
What if the valuer under-estimates the value of my property?
If a valuer under-estimates a property the amount of the under-estimation is usually not large. Market forces will take care of an under-estimation, as purchasers who sense a bargain will be quick to make early offers, and competition between such purchasers has the effect of forcing the price up to a figure that represents the best price the market will bear.
In any case, you are not obliged to accept any offer unless that offer is for an amount that is acceptable to you. So, even if there is only one offer, you can still make a counter-offer at a higher and more acceptable figure.
What if the valuer over-estimates the value of my property?
An over-estimation does not assist anyone. A vendor will not be inclined to sell at a figure that is under the
valuation
figure, and too high a starting price may deter purchasers from making offers. In circumstances where a valuer has over-estimated the value of a property and no offers are received, a fresh assessment at a lower figure may produce offers that, with the benefit of competing offers, exceeds the figure stated in the first
valuation.
What if I'm not satisfied with the valuer's valuation?
This is a matter to be resolved between you and your valuer. You have engaged a valuer for the purpose of providing you with an independent and reliable assessment as to the
current market value of the your property. If the valuer has been unable to convince you as to the accuracy of the
valuation
you should question either the competence of the valuer, or the basis for your dissatisfaction. In our experience vendors usually regard the
valuation
as a "reality check".
Example:
A elderly lady had put a retirement village "on hold" pending the sale of her home. She needed $380,000 for her home in order to pay for the retirement unit. She expressed anger and disappointment with her valuation of $320,000. We explained to her that she should discuss the valuation with her valuer, but we made the observation that a change in the valuation is of little use if it simply results in an over-estimation. After discussing the matter with the valuer the client realised that the valuer had assisted her to realise that her hopes of selling for a price that would allow her to purchase the retirement unit were unrealistic. She decided against moving from her present home, and acknowledged that she was better off for having discovered the value of her home before she had put it on the market, rather than going through the stressful process of running a long but ultimately unsuccessful sale campaign.
How much over the valuation can I expect to get?
While many properties sell for a figure that exceeds
current market value, it is wrong to assume that this is always the case.
The
current market value, as set out in the valuation, is what the
valuer
expects the property will fetch as at the date of the valuation. It is a snap-shot; an indication of where the property sits in the current real estate marketplace.
While we invite offers within the
price range as a starting point for negotiations, there are numerous factors that can affect the final sale price.
We examine these influencing factors in our section titled
"Price vs Valuation" >>
Do I have to accept an offer that is within the price range?
No. The
price range is simply a starting price for
negotiations
. However, a vendor has a responsibility not to engage in conduct that is misleading or deceptive. (For example, a vendor who allows a price range to be advertised, but has no intention of accepting any offer within that price range, may be acting illegally.)
Of course, there is nothing unfair about market forces in the form of competitive offers taking the sale price well beyond the
valuation
figure.
If clients ask as to whether they should accept an offer or wait in case better offers eventuate, we always recommend that they should consult the valuer for an opinion. (See "Can a purchaser pay too much for a property?")
Can a purchaser pay too much for a property?
Where the sale is conditional upon finance (and most are), the answer is yes. We saw this occur during the recent property boom. In one case a conveyancing client who had sold through a local estate agency was pleased with the sale figure. However, the contract was conditional upon bank finance being approved within 14 days. Banks always have the security property valued by their own valuer before giving final approval, and in this case the bank concluded
that the purchaser had paid too much for the property. Finance was declined, and the sale fell through.
Is a purchaser allowed to offer less than the price range?
This question is often asked by purchasers, who put it this way: "What if I make an offer that's below the lower figure of the price range; will you still put it to the vendor?"
The answer is "Yes". We have a duty to put all offers to the vendor, because it is the vendor's right to decide to accept or reject an offer. However, we do advise purchasers
who indicate an intention to submit a low offer that such an offer is unlikely to be accepted. We explain that the vendor has gone to great lengths to determine the current market value of the property, and
that vendors are always advised to take care in accepting an offer that is below the valuation figure.
We also explain that we advise vendors that any decision on what is or isn't acceptable is a matter for the vendor alone, although such decisions should be made with
the benefit of advice from the valuer.
In any event, if the vendor is not satisfied with the offer, a counter-offer can be made. It will then be up to the purchaser to decide whether or not to accept the vendor's counter-offer.
Whether the initial offer is low or high is of no real significance if it means that negotiations commence, particularly if a mutually acceptable price is the end result.
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