Pre-sale market valuation vs agent appraisal

What’s the difference and why does Airlisting require a formal valuation?

 

Airlisting House valuation

You own a house, and naturally you’re interested in knowing its value. More specifically, you’re interested in knowing what your house would sell for in the current market.

There’s plenty of real estate centric junk mail flooding your mailbox each week; agents offering free appraisals to advise your property’s worth. But, what exactly is an appraisal? How does it differ from a valuation? Is one more reliable than the other?

With Airlisting, gone are the days of feeling pressured into selling your house with an agent because their appraisal was more attractive than another, or their personality was more charming than the next agent’s. We’ve set the prerequisite that every property listed on Airlisting undergoes a formal pre-sale market valuation, and now we’re going to explain our reasons why.

To begin, let’s look at the differences between a formal pre-sale valuation and an agent appraisal:

 

Pre-Sale Valuation

Appraisal

Who can perform

·  Only a Certified Practicing Valuer

·   Any real estate agent

 

 

Required qualifications

·  University degree

·  2 years’ experience within property valuation fields

·  Pass a professional interview and be accepted into the Australian Property Institute

·   2-day course (REIQ)

 

 

 

 

 

 

What’s involved

·  Zoning research

·  Title search

·  Caveat review

·  Market trends research

·  Suburb trends research

·  Comparable sales research

·  Comparable rental research

·  Valuer attends your property

·  Measurement of all dimensions and areas

·  Check connected services

·  Review of building materials

·  Property condition review

·  Determination of market value

·  Determination of market rent

·   Compare similar property sales in a similar location

·   Check current list prices of similar properties

·   Guess what the property may sell for

 

Completion Timeframe

·  2-3 days

·   Some agents offer an appraisal within 3 minutes of viewing a property

Who relies on the information

·  Anyone requiring a definitive value

·  Banks and lenders

·  Courts

·   Information cannot entirely be relied upon by anyone

 

 

 

 

Cost

·  Around $500

·   Appraisals are normally offered free of charge as a lead-generation exercise to secure listings and future sales commissions

·   Due to the unreliable nature of an appraisal, agents aren’t legally allowed to charge for the service

Now we’ll answer a few common questions on the topic.

1. Can a real estate agent complete a property valuation?

No, only Certified Valuers can perform property valuations. Agents aren’t authorised to determine the value of a property, and that’s exactly why they aren’t able to charge for the service. By not charging property-owners for an appraisal, agents avoid liability if the information they provide is inaccurate. Over time, this has created a network of agents who overestimate property values to secure listings for personal gain, rather than the benefit of the vendor.

2. As a seller, what’s the benefit in having a formal pre-sale valuation?

A pre-sale valuation provides the seller with a definitive value to aim for during their property’s campaign. On Airlisting, we suggest sellers use the pre-sale valuation to inform their list price by stating their consideration of “offers over valuation price”. This allows transparency in the amount a seller will realistically achieve, and confidence in the amount a buyer is willing to offer.

Based upon average property sales in Australia being discounted 6.1%, a property listed at $700,000 would expect to sell for $657,3000. That’s $42,700 lower than the original list price. Deduct 2.75% for the agent’s commission fee, and a total of $639,225 hits the seller’s pocket. That’s a far stretch from the original $700,000 the seller was hoping to achieve. 

Looking deeper into this scenario; a property that lists higher than its value could receive modest enquiry within its first weeks on the market before an agent-seller price reduction agreement is made. Now may be a good time to mention that a property’s prime selling time, in which it receives its most abundant offers, is within the first 30 days on the market.

Airlisting property valuation

3. Is it true that valuers base their reports on information that’s too scientific, and fail to include local market knowledge?

Most of the 65,000 real estate agents in Australia earn less than $100,000 per year. On average, that equates to 5-15 property sales per agent, per year. Airlisting’s recommended property valuation companies complete 1,200 property valuations per day or 438,000 valuations per year. There’s truly no comparison when it comes to market knowledge.

4. Is the valuation required by Airlisting the same as the bank valuation when applying for a mortgage?

In short, no. Bank valuations are for mortgage security purposes whereas Airlisting requires a pre-sale valuation to determine the true market value of a property. That is, ‘the amount for which the property should exchange between a willing buyer and a willing seller in an arm’s length transaction after proper marketing, where both buyer and seller have acted knowledgeably, prudently and without compulsion.’

And, there you have the differences between a valuation and an appraisal, and the reasons why Airlisting sets the prerequisite to have a pre-sale valuation prior to listing.

To organise a pre-sale valuation for your property, join the movement, head to airlisting.com

What’s your opinion on a pre-sale valuation versus an appraisal? Tell us about your experiences in the comment section below.

 

References

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Comments

  • Shareen 16 Aug. 2018, 11:30:47 pm (4 months ago)

    I completely agree with this article. Just guessing a sale price is really high risk, getting a market valuation is definitely a good idea when selling.

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