Thursday, 17 August 2017

Your handy guide to property valuations

With many higher-end properties reducing their ‘for sale’ prices, it begs the question, how do agents

With many higher-end properties reducing their ‘for sale’ prices, it begs the question, how do agents reach their figures in the first place? LUCY BOON talked to a few experts, and, on a general basis, this is what she found…

WHEN you go through the process of valuing your home to put it on the market, you may have noticed that the valuation process does not involve just one figure called “the price”. There are different kinds of prices (figures) involved — the “asking price” usually being the most important one. This is the price that a house ends up on the market at.

But first off, you need to know the jargon. The “asking price” is what a seller hopes to achieve for the property. It’s the advertised price for the property, worked out with advice on the local property market from, for instance, the seller’s estate agent.

However, sometimes the asking price of a property might differ from its theoretical market value. Market value is the likely price a property would bring in a fair sale. A professional surveyor may be able to identify the “market value” of your chosen property.

When the vendors agree to a sale with a buyer, the price they agree on is called the “agreed price”. This is not necessarily the same as the “asking” or “market” price — it can be more, less or the same.



And watch out — during the selling process a seller is still entitled to later on accept a higher offer from somebody else (a new buyer). This is sometimes known as gazumping — that is, it’s the new buyer who does the gazumping. The seller is only committed to a sale once contracts have been “exchanged” (this makes the sale legally binding from that point on).

But how come there are other “valuations” sometimes needed? Well, not only your estate agent needs a figure. An independent valuation company, a building surveyor, an insurance company, and a mortgage lender can all give you their own figures — their own valuations — based on their particular roles in the buying and selling process. Some of them may even be used to help work out the asking price of a property.

Property valuation: this tells you how much your home is worth if you were to put it on the market. The process itself is typically very straightforward for residential property — you can do it through an estate agent, or you can get an independent valuation from a professional (or chartered) surveyor.

A professional surveyor will establish the value of your property by comparing it to what similar properties have sold for, and considering all the features of your property that could affect its price. This will include its size, location, condition and how quickly the sellers want to make a transaction.

A surveyor will value your home, while an estate agent will guide you to a suggested asking price based on, among other things, their knowledge of the area, current demand from buyers and existing competition from other property for sale.

Income valuation: the property valuation method is common for residential sales, but for investment purposes a slightly different method might be used. This kind of valuation, known as the “income method”, looks at how much money the property could make in the future if it’s bought now. Naturally, investors find this useful.

Mortgage valuation: when you’re applying for a mortgage the lender will make their own estimation of the value of the house you want to buy. From that figure they can make a provisional decision on how much they’re willing to lend you for a mortgage. But most importantly, it can give you a very rough idea of how much you should be paying.

A mortgage valuation, otherwise known as a basic valuation, usually involves a quick half-hour survey of the property that covers any obvious problems without going into too much detail. It’s typically handled (commissioned) by your mortgage provider as a mandatory part of getting a loan from them, and often costs around £150.

Just be aware that this is not an in-depth survey — the valuers are only interested in working out how much security the property provides (that is, you will still need to have a separate professional survey done, to cover your own back).

And now for the other, lesser-known valuations...

Insurance valuation: when a surveyor assesses your house, they may also carry out an insurance valuation. The purpose of this is to establish the insurance value of your property based on whether your property would cost more than the average market construction price to rebuild if it was bulldozed, burnt down or damaged beyond repair.

Online valuation: these are usually calculated by a computer (not a person) based on your location, property type and current market prices. But be warned: they’re highly likely to be inaccurate.

Matrimonial valuation: these valuations are used in divorce or separation proceedings — the courts use them to determine how the couple’s assets will be divided.

Probate valuation: following a death, you may need to get a probate valuation of any property or assets the deceased owned, so that inheritance tax can be calculated.

Tax valuation: if your transaction is subject to capital gains tax, a tax valuation will help you work out how much you need to pay.

Retrospective valuation: this is establishing the value of your house on a specific date in the past.

Expert witness valuation: if you’re involved in litigation of a property dispute, an expert witness valuation will provide a professional, credible survey that can be submitted to, or relied upon, in court.

Building reinstatement valuation: this is part of your insurance valuation — working out the price of rebuilding your property in the event it’s damaged beyond repair, including any insurance risks involved.

For more information on getting a free property valuation contact the agents in this newspaper or call the Romans valuation-specific team on 01344 985666.



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