Have you ever wondered how valuations work?
What’s your property really worth?
If you’re in the market to sell or you want to refinance you will want to know what your home is worth. But it’s an inexact science, basically the real valuation is the price someone is willing to pay and you’re willing to accept. A valuation is derived by comparing other properties, that have similar attributes to yours that have recently sold, and add or subtract to come up with a fair comparison.
It’s handy to keep in mind that the data the valuer is using is at least 12 weeks old – from the time someone agrees to buy a home until the home is settled is 6 weeks and the data isn’t forwarded for up to 6 weeks thereafter. This is a huge issue in a rising market if a valuer can’t see the value you want in their supporting data, but can work to your advantage in a static or slowing market.
Another interesting aspect is a valuer rarely comes up with their own price from scratch – more often they’re asked to justify the value that has been suggested to them – if the price that you’re paying or the value you need to get the job done is close to the mark very often they will do their best to support it but they’ll only offer a suggestion if the price you’re asking is not even close.
While we all believe there should be a set in stone figure – the reality is this is not the case.
Look at the number of times you see a standard home sold in your area and wonder how on earth did they get that price, or why did that go so cheap, there is no actual “value” for a property in this regard. As a seller, and I have held a valuation in my hand that says my property is worth more than the current offer, no amount of evidence or valuation reports is going to force more money out of someones pocket, therefore the ‘value’ has no impact on the actual market either.
So, an interesting tool but by no means gospel.