Understanding property appraisals in real estate

Understanding property appraisals in real estate

When you’re keen to sell your home or have a genuine desire to find out the estimated market value of your property, real estate agents are the people to call for property appraisals. Real estate agencies readily provide these evaluations, also known as “market appraisals”, as a free service that serves a variety of purposes. Numerous factors determine the key figures at the end of a property appraisal, including school zones, structural integrity, and internal finishes.

A property appraisal differs from a property valuation performed by a licensed valuer. Traditionally issued for institutional bodies, property valuations are concerned with equity. They assist in financial assessments and legal settlements and serve as a basis for real estate agents when quoting expected prices for marketing purposes. A property valuation is what would be considered legally binding in court.

What’s the purpose of a property appraisal?

The main purpose of conducting a property appraisal is to determine the estimated value of an individual property within the current market. It informs motivated sellers with an approximation of their property’s market value, assists homeowners in analysing the cost-benefit of further investments like renovations, and provides insight into capital gains.

Typically, a property appraisal involves the on-site attendance of a real estate agent and thorough suburb, micro-suburb, and buyer research relevant to the current market. It’s critical to note that a property appraisal is only an estimation and is not legally binding. This is why most agents quote in ranges.

What’s considered in a property appraisal?

Location

Proximity to key amenities, including shops, parks, schools, and public transport, holds a vital bearing on the value of a property. While most amenities, such as train stations and schools, remain in their current locations for the duration of a property, their removal can occasionally occur, and the addition of new amenities can significantly boost a locality’s value.

Public transport links to the city, like train stations, will always be of high value, as properties without links may require car ownership for city workers.

Schools are another essential criterion – most notably, coveted public school zones like McKinnon Secondary College, Balwyn High School, and Box Hill High School in Melbourne.

Size

A property’s value is also determined by the size of its land, home, and the relative size of spaces within. That’s the number of bedrooms, bathrooms, and outdoor spaces it contains. Key layout factors include extra living spaces, study spaces, and that 2nd bathroom or ensuite to the main bedroom.

The land size will also give ideas of what potential lies within the property for extensions, rebuilding, or redevelopment. As for apartments, the number of total residences within the block plays a key role in property estimation. Rule of thumb: the land component is always considerably more valuable than the “air value” of a first or subsequent floor.

Planning zones

Planning zones are determined by the state government and monitored by the local government authority. Each property sits within a demarcated zone, be it residential (neighbourhood zones), earmarked for growth (general residential zones), surrounded by retail, commercial, and residential diversity (an activity zone), or commercial and industrial. These zones indicate a land’s potential for buyers.

Different zones will regulate the heights and lengths to which construction can occur and the requirements for subdivision and redevelopment (all subject to Council approval). Then you’ve got regulations, like heritage overlays, landscape overlays, and other controls, limiting a locale’s capacity for rebuilding, renovation, or development.

Structure

A property’s overall structure and condition significantly impact its appraisal. Generally, real estate agents don’t look too closely, but those with experience can spot quality inefficiencies. The better the quality, the newer the renovations, and the sense of pride reflected in maintenance will always attract a higher appraisal figure.

Finish

The quality of internal finishes in terms of flooring, walls, benchtops, window furnishings, and appliances is another key factor. Similar to their sense of newness, surfaces with lasting quality such as timber, concrete, and carpet are easily identifiable.

The market

We will directly compare the state of recent sales in an area (usually 90 days) to a property to determine its relative value. The state of the economy and relative interest rates will also be considered. A real estate agent may actively inquire into a homeowner’s intention to sell, but most experienced agents accept that market value prediction is unreliable, as anything is possible. Their appraisal is based only on current sales of comparable properties.

Ease of access

How accessible is your property? Is it on a dirt road, a major road, or a congested street? If it’s an apartment, is there lift access, or do you need to climb the stairs? All these observations will determine your property’s worth.

How to choose an agent to conduct a property appraisal?

Experience plays a significant role in the quality of a property’s appraisal. A real estate agent’s suburb knowledge, understanding of the state of the market, and grasp on overall build quality directly influence an appraisal’s accuracy.

A casual and friendly walk around your home is typically part of the property appraisal process, aimed at capturing the essence of its presence. At this stage, extensive cleaning or decluttering is only necessary if getting your property on the market is an immediate priority. There is no need for apologies; agents see homes in all states and know it’s part of the process. If you are getting an appraisal with the intention of selling in the near future, getting a feel for your agent is key.

Examine whether they prioritise your best interests, if they instill a positive sense in you, and whether you are confident in the potential for a beneficial relationship and service. Remember: Pricing is not indicative of expertise – avoid judging agents by the cheapest price.

To have your property appraised by one of our fantastic real estate agents soon, please contact the friendly team at Besser & Co.

With decades of experience locally and internationally in both small and large agencies. Proudly serving in Australia since 2009. A trusted property management company by Australians.