Like all professional fields, real estate has its share of specialist terms that sometimes need a little explanation to avoid any confusion. Because of its apparent similarity to property valuation, property appraisal is one of those terms. In fact, though they are both very important for a homeowner, property appraisals and property valuations don’t serve the same purpose, and the terms can’t be used interchangeably.
This short article explains 5 things you should know about property appraisals to help you understand the term and find out exactly what you can expect when you decide to have your property appraised.
What exactly is a property appraisal and how does it differ to a property valuation?
The question on every potential seller’s lips is, “What is my property worth?” Having a property appraisal is an informal, non-binding, and free way of finding out the estimated market value of your home under current market conditions.
Best carried out by a trusted local real estate agent, based on their expert knowledge of the local and wider markets, a property appraisal will provide you with a clear estimate of the potential value of your property if you were to sell it under the current market conditions.
In contrast, a property valuation, which must be carried out by an accredited valuer and will usually incur a fee, is a legally-binding report detailing a property’s market value at a given moment in time. If you need a definitive monetary property value,“ for example, for a family settlement or to present to a potential lender,“then you must have a property valuation.
However, it’s important to realise that a property valuation will often be a little more conservative than a property appraisal. This is because, unlike an appraisal, it won’t take into account market sentiment", the personal motivations and emotions of potential buyers", which is something that can make an enormous difference to the actual sale price of your property.
What does an agent look for in a property appraisal?
Your agent will give you a clear house price estimate based on market research and a physical appraisal of your home.
First of all, they’ll crunch the numbers with a comparative market analysis that looks at all similar properties sold in the previous 90 days. The more similar the properties are to yours, the more accurate your property value estimate will be.
Your agent will also look at any current competition and consider the wider market, analysing trends and drawing on their knowledge of the local area to calculate a value estimate for your home.
They will then look closely at the specific features of your property to refine their assessment. The most important factors they will consider are:
- Location (location, location)
- The structure and condition of the building(s)
- The size of the property
- The number of bedrooms and bathrooms
- The general appearance of the property, inside and out
- Any interior fixtures and fittings
- Any renovations or extensions that have been carried out
- How easy it is to access the property and buildings
- Any areas that need improvement
- Any local zoning restrictions that might apply to the property
When should I get a property appraisal?
Most people assume that a property value estimate is only useful if they are planning to sell, and of course, it is highly recommendable to have an appraisal if you are. But there are other times when it would be well worth getting a clear understanding of how your property is performing in the current market.
For example, suppose you are thinking about renovating your home or building an extension. In this case, an appraisal could help you identify what an eventual buyer will be prepared to pay more for and could guide you, to some degree, as you make decisions about what to change and how to change it.
If you’ve already done the work, an appraisal will help you understand its impact on the market value of your property.
In a fluctuating market, you might want to have an appraisal to keep abreast of how the highs and lows have affected your property value.
Finally, if you are thinking of using your existing property to secure finances for further investment, an appraisal could give you a fair idea of how much equity you have in your property, helping to plan accordingly.
Do I need to prepare my property for an appraisal?
Unlike open days, inspections, and marketing campaign photography, there won’t be a stream of potential buyers looking at every detail of your home during a property appraisal.
Agents know how to see past the lived-in muddle of a busy household, so there is no need to style your home for an appraisal, though you’ll certainly want to make sure it’s looking its best when it comes to the actual selling.
It’s a great idea to have as much information as possible to share with the agent. Details of work done to the property, including invoices or other documentation, and up-front information about any problems you might have had, will help the agent give you a far more accurate property value estimate.
A property appraisal is also a great time to ask the agent any question about the local and wider property market, who they see your buyer could be and what they would suggest you did to your property to ensure it achieved the best possible result.
What will I receive after I've had a property appraisal?
The whole reason you’re having a property appraisal is to get a clear understanding of the potential value of your home in current market conditions.
Your agent will provide you with exactly that, along with a comprehensive report detailing the information they’ve based their value estimate on.
They will also point out any areas that could be improved and offer guidance on how best to optimise your property for sale if that is what you are planning to do.
A property appraisal is a smart way to keep tabs on how your property is performing in terms of market value. Getting your appraisal done by a local agent who knows the area well and has a deep understanding of the market is the best bet, whether you are selling, thinking about adding value to your home, or just keen to get a better understanding of your financial position.
The team at DiJones would love to help you get an understanding of your property’s current market value. To connect with your local real estate agent click here.
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