If you are in the early days of considering the sale of your home, a property appraisal can be a great tool to guide your decisions. By way of giving you specific insight into the property market in your area, the appraisal may prompt you to sell your house as is, or it may guide you to invest in some strategic property upgrades ahead of putting it up for auction.
Either way, an appraisal is a great way to kick off a serious conversation about selling your home. But be careful — an appraisal can often be mistaken for a valuation. Both generate a written report, but the two differ greatly, as we will explain.
If you are preparing for a property appraisal in the Gold Coast or Surfers Paradise area of Queensland, read on to learn more about the process.
The many reasons for an appraisal
Simply stated, a property appraisal is a process through which you can determine and assign an approximate market value to your residential property. A market appraisal includes a home inspection and analysis conducted by a real estate agent. It will consider many factors and generates a time-bound figure. The appraisal is relevant only for a short duration because it considers the state of your property as it exists in present market conditions. It is a snapshot of the value of your property in relation to similar properties as they exist in the current moment.
It is always an unofficial figure, an estimate of the price a house could command were it put up for sale. The appraisal has no legal standing.
Many factors contribute to the final appraisal figure beyond just the four walls of your home and the land on which it sits:
- Recent comparable sales, particularly the last 90 days
- Current market conditions
- Location of your home
- Anticipated changes in local infrastructure
- Access to amenities
- School boundaries
A home appraisal can be sought for many reasons. The appraisal process is useful for gauging the value of the home after many years of ownership; if the property was bought several years ago in a far different marketplace, homeowners may truly be uncertain about its value in today’s local market. By factoring in data on recent sales, an appraisal can also help homeowners decide if they will sell their home today, or if they would rather wait for market conditions to change. They may also use an appraisal to determine rent prices if deciding to rent the space. Finally, an appraisal may lead homeowners to decide whether or not to invest in remodelling or updating their home in various ways ahead of putting it up for sale.
Valuation versus appraisal: What you need to know
Remembering key differences between the process of an appraisal and a formal valuation is important at the outset of the process. The latter is more formal. Where an appraisal is an unofficial estimate — an educated best guess — at how a property would fare on the open market, a valuation is a formal and definitive figure. It can be cited in legal and banking procedures. For example, if a home is part of a deceased estate and needs to be valued for legal proceedings, a valuation makes sense — and an appraisal wouldn’t. A valuation is also appropriate to help settle a marital dispute. Should there be valuation objections, perhaps questions by other parties in a dispute, supplementary valuations may be sought.
The document is likewise useful for obtaining a home loan or a mortgage, creating a solid foundation for lenders concerned with loan-to-value ratio.
While an appraisal is completed in just a few days by a real estate agent, a valuation is an in-depth process done by a licenced professional known as a valuer. This concrete determination of your property value usually costs several hundred dollars. The valuer, sometimes called a valuator, has formal education and qualifications they will use to assist them in making the valuation. It will likely take more time than an appraisal to generate.
The valuer will consider many of the same factors as an appraisal, but with greater scrutiny:
- Size of your home
- Numbers of bedrooms and bathrooms
- Condition of the kitchen
- Building structure
- Environmental risks
- Special features of the house
- Any legal encumbrances related to the house
- Sales figures from comparable property
- Nearby amenities such as schools
The role of a property appraisal for increasing equity
Where a valuation is about setting a definitive value on a property for legal or financial purposes — for example to settle a divorce proceeding or to obtain a mortgage loan — an appraisal is an attempt to reasonably estimate the price a seller would pay for the home. It’s a good mechanism for understanding the value of a home in today’s marketplace.
Learning about your home’s current value can be useful for several reasons, including decision-making involving home renovations. If your home is in an established, older area of town and has not been updated in many years, this may have a negative effect on its current value. An appraisal can help you find out. If many nearby homes have been renovated in recent years, perhaps it’s time to consider upgrading your property so as to be competitive. On the other hand, it could be that the difference between upgraded homes and ones with older amenities isn’t that great — data that if you know it, might save you the headache of making renovations ahead of a sale.
This is why you can’t lean on an old appraisal. It won’t account for recent changes in the marketplace. After all, your house does not exist in isolation. Beyond comparing your property to others, it’s key for a market appraisal to consider if perhaps, say, a school nearby has opened – or closed. A new roadway may have been built, making for faster commute times to the closest city. These changes will all impact the value of your home – which an appraisal will tell you.
How your appraisal will help sell your home
The role of an appraisal in residential real estate is to create a starting point — a data point owners can use to make decisions. It is not public information and will not be part of any formal processes involved with selling your home, such as an auction.
As your real estate agent will explain, this means your house can sell for more than it was appraised for — or perhaps not. The final sale price will depend on prevailing market conditions. The appraisal is just an estimate, unlike a property valuation. Keeping these two terms clearly defined as you begin this process will save much confusion, as they can be easily misunderstood.
The professionals at Ray White Surfers Paradise can help clarify the entire process of selling your home. Our experienced team can help with the initial appraisal through to the day you turn over the keys. If you’d like to know more about how we can help you achieve your goals in residential real estate, please contact us today.