Getting a valuation
When it comes to determining the true value of your property, the only person you can trust is an independent and properly
accredited valuer.
Only a qualified and accredited valuer
is permitted by law to provide a real estate valuation. While most estate agents
offer free valuations or appraisals, these have been described as "free cheese in the mousetrap". (See our page Estate Agent Valuations
for more about this.)
Why you must get a valuation
Ignorance is not bliss
We are aware that one of the main shortcomings of the present real estate industry is that neither the vendor,
nor the purchaser, of real estate ever know the
current market value
of the property being sold. This fact alone
is responsible for much of the dissatisfaction and disappointment reported by consumers. It also produces circumstances
that can be exploited through
deceit
and
unethical
practices.
A vendor who knows the
current market value
of their property is empowered, remains in control of the sale, and can
make sound and well-informed decisions.
Our duty to our client
Our
fiduciary duty
to the vendor, arising from our lawyer-client
agency
relationship, requires us to give our client the full benefit of our knowledge. We have a duty, not only to inform
our client, but also to ensure that our client does not allow themselves to be misinformed.
By requiring all vendors to establish the
current market value of their properties by way of a formal valuation, we
can ensure that every vendor is able to determine what the market is likely to pay for the property, and consequently whether or not
it is a good idea to sell in the current market.
Having the vendor obtain the valuation, before instructing us, ensures that the vendor has time to decide whether or not to sell. It also
keeps the valuation process completely independent of the sale. In addition, the
perennial problem of deliberate "over-quoting" and "under-quoting" of property values
is eliminated.
Firm basis for a market range
The
current market value is an objective basis for establishing your
market range.
Your property will be advertised in terms of its
market range. It will be explained to purchasers that we do not expect our client to accept less than the lower figure of the range, and that
any offer should be made at a figure that is within the range.
A purchaser who understands how the
market range
figure is determined, and realises that we have a duty to ensure that our client does not sell the property for a figure below the
market range, will make an initial offer that is realistic and likely to impress.
Ongoing reference
Sometimes there can be a dramatic change in the market. It doesn't happen very often, but when it does it can
severely affect
the chances of a sale.
If plenty of people are viewing the property on the internet and, despite the interests shown, there are no offers made, then perhaps the price is
not attractive. Worse still, the price may be severely affecting the "saleability" of the property.
It is possible to return to the valuer
and use them as a consultant. The valuer
may be in a position to explain that there has been a drop in prices. Perhaps the valuer was a little too ambitious with the initial valuation, and
suggests that the figure should be modified. The valuer may explain that your property is at the "upper end" of the local market, and that patience rather than a drop in price, is the best marketing tool.
Your valuer becomes your consultant. Most importantly, however, your valuer
is your independent, professional adviser on matters concerning the value of your property. You have the peace-of-mind that comes
with knowing that your valuer will tell you what you need to know, because they have been chosen by you, and are totally independent.
Benefits of the formal valuation
The formal
valuation assists the vendor in several ways:
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Reliance on a professional: The valuer is an expert, providing a specific professional
service in return for a professional fee. This means that the valuer has a duty to conduct proper research, and to use
sound and professional judgment. A valuer's assessment is always in writing, and must
be able to withstand scrutiny by other professional valuers and, if necessary, by a court. All of this means
that the valuer is a very reliable partner when it comes to determining the current market value of your home.
Your valuer will also give you professional guidance when you are considering offers.
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Reality check: The valuation acts as a "reality check", providing an objective basis for the decision to sell, and the final sale price.
It is most important that you know the value of your property BEFORE you decide to put it on the market.
Anecdote:
An elderly client wanted to move into a retirement village, and had
paid a deposit on a unit worth $380,000. The purchase was made conditional on her selling her
existing unit, and she needed $370,000 for the arrangement to be viable. When her valuation showed that
her existing home was worth only $320,000 the client decided that she would be better off staying where she was.
(In similar circumstances estate agents have been known to quote a high price in order to secure the listing, then to "talk down" the value of the property during the sale period in order to have the vendor lower the price to meet the market.)
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Creating market interest: Pitching the price at the right level creates buyer interest. By using
the valuation as a starting figure, the vendor can ensure that the advertised market range will be "in the ball-park" for most purchasers. |
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Starting point for pricing: You want to know what to expect from
the market, and purchasers want to know where they stand with regard to making an initial offer.
The formal valuation is an ideal starting point for determining a price range, because it is soundly based.
Purchasers tend to be timid and conservative when they are uninformed and unsure about price. However, they will proceed with confidence and vigour when negotiations commence within a fair and objective price range.
Confident, informed purchasers will pay what is necessary to secure the property they want, even if
this means paying well over current market value. The approach becomes one of "I know what I want and I'm prepared to
pay for it".
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Transparency: In keeping with the general theme of transparency and
ethics in real estate, the use of the valuation ensures that vendors and purchasers alike remain in control of their side of the transaction. A vendor
who wants to make a quick sale may decide to sell for a little less than the current market value.
Similarly, a purchaser who has found the perfect home can offer an amount that is well in excess of current market value if they are determined to secure the property ahead of other competing purchasers. The important point is
that each party is able to make an informed decision. In addition, if either party has any concerns about
the true value of the property, they can always obtain a second opinion from another professional valuer of their choice.
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Fine-tuning is possible: The valuation figure can be "fine-tuned" to the market. If there is
a lot of interest in the property, market forces will result in purchasers bidding against each other, driving the price higher. On the
other hand, if no offers are made it is possible that the valuation was a little ambitious. After consultation with the valuer, the
vendor may decide to slide the market range down slightly, to bring it within the range of the market. |
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Readily accepted: It is difficult for anyone to argue about a valuation. For example, a buyer’s agent who
attempted to "talk down" a client's property had no answer when told that a professional valuer had established the current market value of the property, and that the valuer's assessment was preferable to that
suggested by the buyer’s agent.
When it is explained to a purchaser that an offer made below the price range is unfair, the first offer is usually made at a figure that is within the price range. Where two or more parties are
interested in the one property, competitive bidding invariably starts at a figure that is at the higher end of the price range. |
How to find the right valuer
There are numerous ways to find the right valuer. Take care when choosing
your valuer, as
estate agents
have been known to masquerade as independent valuers. If the valuer suggests that they may be able to assist
you in the sale of your property, you may discover that the valuer is an
estate agent
who has become a qualified valuer.
The problem with
estate agents
who become qualified valuers is their failure to avoid
conflict of interests.
Instead of avoiding a situation where they act as both
estate agent and valuer, many valuer/
estate agents exploit their dual
status as a marketing tool.
To find an independent valuer with good local knowledge:
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Use the local Yellow Pages, not the larger version. |
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Look under the "Valuers - Real Estate" category. |
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Avoid valuers who are also estate agent. |
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Ask the valuer to confirm that he or she is NOT also an estate agent. |
If you decide to use a valuer who is based outside of your municipality, have them
confirm that the valuer who will be attending at your home has experience in assessing real estate values in your
local area.
What to tell the valuer
Valuers provide services for different purposes, and with varying degrees of precision. For example, a valuation
for a bank may be a general and conservative estimate as to whether or not a property will secure a loan. A sale
valuation, however, requires a more considered assessment. The valuer should know the purpose of the valuation.
Give your valuer the following information:
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You are putting your home on the market, and you require a valuation for this purpose; |
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You need to discover whether your estimate of the property's worth is realistic; |
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You want to know the current market value of your property; |
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You may later seek guidance from the valuer as to whether a particular offer is reasonable in the prevailing market; |
What to ask the valuer
Consider asking your valuer the following:
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Should any cosmetic improvements (a fresh coat of paint, garden maintenance etc) be undertaken
to increase the value? |
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Would improvements constitute an investment in the property, or would this be over-capitalising? |
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Are prices in the area trending upwards, or down? |
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How far over the valuation would the valuer expect a keen purchaser to pay,
before a lender would refuse to accept the purchase price as fair value for loan security purposes?
NOTE: Most purchasers of real estate require a mortgage in order to pay for a property purchase. If the purchaser pays more than a property is worth, the
bank may refuse to accept the property as security for the loan. If this happens, the purchaser's loan will not be approved and the
sale may be cancelled.
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Remember that your
valuer plays an extremely important role in the sale process. The
valuer is a professional person, and is being paid a professional fee-for-service to advise you in a consultative capacity.
Be sure to take full advantage of your valuer's skill and expertise when making decisions about your sale.
Disputing the valuation
Occasionally, a vendor will be dissatisfied with the valuation. This may be result of high expectations generated by
"
appraisals" offered by
estate agents
keen to impress and win a listing, or the vendor may "need" a certain figure in order to purchase elsewhere.
Whatever the reason, some vendors find that their estimate as to the worth of their property is at odds with that of
the
valuer.
Reality check? or valuer incompetence?
When a vendor disputes the valuation, there are usually two possibilities:
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Perhaps the valuer got it wrong (maybe the valuer is mistaken, or incompetent); or |
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Maybe the vendor can't accept the reality that the property is not really worth as much as they had hoped.
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Whose estimate matters most?
This can be a tricky question, and it requires a qualified answer. First, the vendor's estimate is the one that
matters. The vendor is the owner of the property, and the decision as to whether or not the property will sell, and the figure
for which it will sell must be decided by the vendor alone.
However, this observation must be qualified with another. The vendor will inevitably make an addition to
attributes of the property in terms of emotional value. While there is nothing wrong with emotional value, it can skew the view of the party who is emotionally attached to the property.
The vendor will benefit if a purchaser becomes emotionally attached to the property. At the same time, the vendor adds an
obstacle to the sale if they are emotionally attached to it.
Resolving the problem
The only way to resolve this issue is for a vendor seek out a valuer whose skills and judgment they can trust, and to discuss the
valuation with the valuer, with family, friends, or anyone else whose input will assist.
If the vendor's conclusion is that the valuer may be incompetent, mistaken, or the valuation is otherwise unacceptable, the matter should be discussed with the valuer and perhaps a second opinion should be sought.
Only when the vendor is satisfied with the accuracy of the valuation can a sound decision be made as to whether or not the property will be placed on the market.
Consulting the valuer
There are often times when a vendor will want to consult the valuer before making a decision. Such situations include:
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When determining the market range figure: As discussed above, every vendor who
lists a property with Lawyers Real Estate must have already obtained a valuation from an accredited valuer.
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After some major change to the property: A vendor should seek the opinion of the valuer
where significant cosmetic work is done to the property. For example, having a fresh coat of paint applied to
the front of a weatherboard house, or a major "tidy-up" or landscaping is undertaken in the front yard, it is possible
that the value of the property may be enhanced. Of course, it may be prudent to seek the valuer's advice
as to the likely effect such work would have BEFORE it is undertaken.
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After a change in the local neighbourhood: An announcement by the
government or local council that a new road or other capital development has been approved can affect local
real estate values.
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When no offers are made: If the property has been on the market for a number of
weeks, and no interest has been shown by purchasers, it may indicate the valuation has been a little too
ambitious. (Of course, if the valuation is on the low side numerous offers tend to drive the price up to where it should be.)
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When unsure about an offer: It's the first and only offer, and it's
not quite up to the valuation figure. The vendor wonders whether it should be considered. The valuer's
opinion can be quite helpful, particularly if the vendor is inclined to accept the offer but needs a "catalyst" to assist
in the decision-making process.
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Whenever a question arises regarding value: Vendors are often overwhelmed by
suggestions and advice from estate agents, relatives, and others who want to influence the vendor's decision for one
reason or another. When the vendor wants an objective and unbiased opinion from someone who is qualified to
provide it, the valuer is the person who should be consulted.
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The valuation and the purchaser
Purchasers are not entitled to have access to the written valuation. This is because every valuation carries a disclaimer that states that the valuation has been prepared for the information of the party who commissioned it, and that no other person is entitled to rely on it.
However, if a purchaser wishes to see the valuation in order to confirm both its existence and the valuation figure, we usually advise the vendor that there is no harm in allowing access for this purpose.
Purchasers are always advised that the valuation has been obtained for the purpose of establishing the
market range, and that the
market range is no more than a starting point for sale
negotiations.
If a purchaser indicates an intention to submit an offer than is below the
market range, we will advise the purchaser that we must advise our client not to sell the property for a figure that is below the
market range. This is readily understood by purchasers, and a figure with the
market range usually follows. However, all decisions as to whether or not
an offer is acceptable are the prerogative of the client, and the client will be informed of each and every offer made.
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Conveyancing Section for real estate consumer information, and to our
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