What’s the difference between property appraisals and valuations?
Quite often property appraisal and property valuation are used interchangeably, however, they are actually two distinct processes with different purposes. In this article we cover the differences between the two and why and when you should consider getting them.
What is a property appraisal?
An appraisal of a property is essentially an evaluation of its value, usually conducted by a real estate agent who compares it to similar properties in the area using recent sales data and property features. This gives homeowners an idea of their property's potential selling price, serving as a guide figure based on the agent's local knowledge.
Most real estate agencies offer a complimentary property appraisal service, which can be useful when planning to sell a property, as it provides an estimated value. However, it is crucial to note that a property appraisal is not definitive and holds no legal weight, as it is only an estimate.
When conducting a property appraisal, the real-estate agents will look at:
- Location of the property
- Size of the property including number of bedrooms and bathrooms etc.
- Appearance, general wear and tear and overall condition
- Any renovations and home additions
- Local zoning restrictions
When do you need a property appraisal?
The most common time to obtain a property appraisal is when you ae looing to sell, this is to help you and the real-estate agent you will be using to determine the price based on the factors listed above.
Other times when you may need to conduct a property appraisal may include:
- When you are considering renovations or adding to your property, to help determine what your property would be worth in future.
- Or if you have recently completed renovations on your property and want an updated property value figure.
- When the property market is fluctuating and you want to keep up to date with your property value, incase you need to sell in the near future
- You are looking to buy another property or investment and would like to find out how much equity you have in your property.
How much are property appraisals?
There are different ways you can conduct a property appraisal, usually they are a free service from your real-estate agent when you are looking to sell, otherwise it’s helpful to do your research online to find free property report tools you could use.
What is a property valuation?
A property valuation is a formalized report on exactly how much your property is worth. Usually conducted by a specialist valuer who will visit your property and complete a complex assessment of your property.
Property valuations usually cost a fee and although it depends on multiple factors of your property, costs could range from $300-$600. It’s important to note that some lenders may cover the cost of your property valuation if you are looking to refinance your property.
The property valuation specialist will asses and more in-depth inspection of the property including the following:
- Size of the property including number of bedrooms, bathrooms and land size
- Environmental factors and risks
- The overall condition of the property
- Any renovations, features or additions to the property
- If there are any planning or local council restrictions on the property or nearby properties
- Aspect, topography and layout of the property
- Properties location and local amenities
Why do you need a property valuation?
You may need to conduct or book in a property valuation for multiple reasons including:
- When you are looking to obtain a home loan
- When dealing with family or partnership settlement of the property
- For building insurance policy
- Providing the value of a deceased estate
- Or in any dispute resolution
What’s the difference between the two valuations?
Although both property valuations and appraisals consider similar aspects of a property to determine its market value, there are often differences in the figures produced. This is because the figures provided by real estate agents also take into account local market conditions, including demand for the area and demand for a property similar to yours.
While buyer demand may be difficult to quantify, real estate agents have a good understanding of the local market and are able to estimate the level of competition for your property. This competition can drive up the selling price, and real estate agents, who are more in tune with the local market and typically have an active buyer database for properties similar to yours, are better positioned to provide a price guide that considers market sentiment. As a result, the figures provided by real estate agents are often more closely aligned with the market value of your property if it were to be sold at that point in time.
How accurate are property appraisals?
It’s important to remember that property appraisals can be slightly inaccurate based on a number of factors including the property market unpredictability and potential that the real-estate agent may appraise a property more generously just to persuade the seller to list the property with them.
Tips to potentially increase the value of your property
There are several ways you can potentially increase the value of your property, including:
- Renovate: Updating your property with modern features and finishes can significantly increase its value. This could include adding a new kitchen or bathroom, replacing old flooring or fixtures, or repainting the interior or exterior of the property.
- Enhance curb appeal: First impressions are important, and improving the appearance of the property from the street can add value. This could include landscaping, repainting the exterior, or updating the front door and windows.
- Add extra living space: Adding an extra bedroom or bathroom, extending the property, or converting an attic or basement into livable space can increase the value of the property.
- Improve energy efficiency: Installing energy-efficient features such as solar panels, double-glazed windows, and insulation can increase the value of the property while also reducing energy costs.
- Keep the property well-maintained: Regular maintenance and repairs can help preserve the value of the property over time. This includes keeping the property clean and tidy, fixing any issues promptly, and carrying out regular inspections.
Overall, increasing the value of your property can be achieved through a combination of small improvements and major renovations. By investing in your property, you can improve its appeal to potential buyers and increase its value over time.
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The information in this article is general in nature and should not be considered personal or financial advice. You should always seek professional advice or assistance before making any financial decisions.