- The main factors in determining the value of a property are the selling price of other properties in the area, and the price at which the property in question was previously sold for.
- The advice of estate agents is invaluable in determining a property’s estimated market value, and what its price tag should be.
- Market forces play a substantial role in determining property value and the final selling price; for example, a buyers’ market may force you to sell a property at below the estimated market value.
Whether you are looking to buy or sell, knowing the value of a property is an important step in the negotiation process. As such, it helps to know what factors play a role in property valuation. There is a process involved, and being knowledgeable of it means you don’t have to “guess” the value of the property based on superficial elements
How is a property valued?
The primary factors that professionals use to value a home include:
- The price at which other similar-sized homes in the neighbourhood have been sold.
- The price at which the property in question was last sold for.
These are quick and easy guidelines, but as any professional will tell you, there are a number of other factors that can also play a role, such as:
- The state of the market.
- Age and condition of the home.
- The state of the garden, if one exists.
- The quality of views from the home.
- Security features.
- Aesthetic elements such as flooring, furnishings, kitchen design and so on.
Conducting a property valuation
Here are some ways to value a property:
Hire an estate agent
It’s always best to go to a professional. Estate agents can provide a CMA (Comparative Market Analysis) which will take into account market forces along with the value and selling price of other properties in the area.
Estate agents have an understanding of the property market, and the factors that play a role in property valuation. As well as providing an estimated property value, they can advise property sellers on whether they should attempt to sell above or below market value, and by what margin.
Use online valuation tools
You can use Property24 to check property trends throughout South Africa. This tool allows you to see the seasonal and long-term changes in property prices and sales throughout the country. Simply enter the suburb you wish to analyse and you’ll see stats such as:
- Average asking price.
- Number of properties on the market per month.
- Sold properties.
- Total properties for sale.
- Who owns property in South Africa.
For property buyers, tools such as ooba Home Loans’ Bond Indicator, can provide you an idea of what you can afford.
Market value versus selling value
Determining the market value of the home is just one step in the negotiation. If you’re the seller, you should not assume that the property price will end up being the same as your perceived selling value. Different factors can play a role.
For example, whether we’re in a sellers’ market or a buyers’ market. South Africa is currently experiencing a buyers’ market, which means the supply of luxury homes is exceeding the demand. As such, a seller may be forced to price the home well below the perceived value in order to offload it.
The negotiation game
For home buyers, the market value makes a useful guideline for negotiating your offer to purchase. You don’t want your offer to be too far below market value, but an estate agent can advise you on your chances of securing a bargain deal.
The current buyer’s market provides the perfect opportunity to secure homes at below market value. If you’re looking to purchase a property, ooba Home Loans, South Africa’s leading home loan comparison service, offers a range of tools that can make the home buying process easier. Start with their Bond Calculator, then use the ooba Home Loans Bond Indicator to determine what you can afford. Finally, when you’re ready, you can apply for a home loan.
*Article sourced from Ooba Home Loans*
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