House prices come into the equation when you are planning to sell your home. Naturally you need an accurate house valuation. It has to be a close property value estimate because so much rests on the outcome. You need to know what to expect from the sale so you can plan forwards. For your next purchase. Or your next loan.
You also need to know how to target a price so it’s achievable and you don’t overshoot the market. And it’s not an exact science. House prices don’t crystallise until the moment the deal is done and negotiations are finished. Or until the auctioneer slaps the rolled brochure into a hand and shouts Sold!. Forecasts of house prices and property value estimates can come from different sources and can differ a lot.
This article explains who key players in in house prices and valuations are and how they work.
House prices are a moving target
We’re constantly exposed to commentary on house prices in Melbourne. Certainly house prices are a moveable feast. Mostly moving upwards at present.
Most economists predict at least another 12 months of price growth in house prices but some are predicting a slowdown, linked to expected interest rate hikes.
Melbourne house prices have increased by 3.5% in the June quarter 2017 and 15% over a 12 month period. Most Economists believe house prices will continue to climb into 2018, but opinion is split on apartments, with some warning they will flat line or even lose value. Location of course is a big factor.
Why property value estimates can be different
You may have wondered when house prices are assessed the valuation differs between stakeholders, and then eventually it sells for a figure that is different even again.
When a home is mortgaged, the lender will need to value it. This gives the lender the confidence that the asset is secure enough against the borrowed amount if, for some unexpected reason, you can’t make the repayments and the lender has to sell the property to recoup the debt.
So therefore it’s not surprising that the bank valuation is likely to be conservative. It can be up to 10% or 20% less than the current selling price for comparable properties.
A Real Estate Agent’s estimate &/or indicative selling price
Real Estate Agents assess the house prices. When evaluating a particular house this often can sway a vendor’s decision with whom they appoint to sell their home. An agent estimating a higher house price sometimes gets the nod. But then they have to deliver, or risk receiving negative feedback.
A Real Estate Agent will inspect your home. They will research comparable sales in the neighbourhood and then give you feed back and a written property value estimate or indicative selling price. This will usually be a range figure, as in ranging from ‘$x to $xx’. This usually also determines what the house price will be advertised at.
The Council’s valuation
Each year a home owner gets a rates bill with a Capital Improved Value (CIV) in the notice, a site valuation, a net annual valuation (the NAV) and/or gross rental valuation (the GRV). The CIV is the estimated value of the land plus any capital additions on it like a home. The Site Value is land value only, excluding buildings.
This property value estimate is calculated largely by comparing sales data plus bi-annual data from the State Valuer-General’s offices.
The Councils and the Water, and Fire authorities, use these figures to calculate how much to charge homeowners for using infrastructure and services.
Generally, a Council property value estimate are for rates purposes are regarded as a ‘fair price’ guide only.
Councils have to be conservative to avoid being seen as gouging ratepayers too much. Council evaluations are often considered out of date by a couple of years.
However if a Council were involved directly in a development project, involving acquiring land or dwellings, or disposing of land or dwellings, the targeted reports involved would make their property value estimate much sharper and more accurate.
The Homeowner’s own price &/or expectation
Just about every property owner will have their own wish list house price in mind when they come to sell.
Given people’s typical optimism it’s likely to be at the top end of the achievable scale and often needs a reality check.
The occasional owner will ignore the Real Estate Agent’s property value estimate and insist on a figure they have deduced themselves. This may be through a special insight they have about their own neighborhood conditions, or it may just be over-expectation.
Conversely most people selling a home will also have a ‘low as I go’ figure in mind, where it’s simply too painful to sell.
The Final Sale price
The actual price achieved at the point of sale can be anticipated to some degree. It may be as simple as a buyer meeting the asking price quickly and negotiating a quick buy. More than often though, forces in play will govern the sale price at the moment of sale. Such as the degree of interest, or big turnout on auction day. Buyer’s competing with each other. A vendor’s need to sell quickly. A sudden change in economic conditions.
In the end the market alone governs house prices because it comes down to what a buyer is willing to pay on the day.
Vendor Marketing provides a clear property value strategy
Vendor Marketing has a clear strategy when it comes to achieving an accurate house price &/or property valuation estimate. From this, we implement the correct pricing strategy with the chosen Real Estate Agent.
Vendor Marketing – Melbourne’s most qualified vendor advocates, specialises in both property marketing and real estate agent selection for property sellers within Melbourne, therefore we can assist you with house prices and achieving an accurate property value estimate before selling.
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