If you’re thinking of buying, selling, or you just want to know what your home or investment property is worth, it pays to know the difference between a property valuation and a property appraisal.
They may sound like one and the same but the difference between the two is very distinct, explains Michael Brock, former president of the Real Estate Institute of SA (REISA).
“A formal valuation can only be conducted by a qualified valuer who has undertaken prescribed education and training in this field, to ensure that they take into account all of the features and issues relating to a particular property,” Brock says. “Valuing is a complex task and will take some time to complete.”
An appraisal, on the other hand, is simply an estimation of a property’s value in the current market.
“Appraisals are estimated by the real estate agent’s knowledge of the local area and recent sale prices, and they should only ever be used as an estimate of price,” Brock says.
“They are not definitive and have no legal standing. It is rare to charge a fee for appraisals and they are generally only requested by potential vendors to get a ‘feel' for the local market.”
It is for this reason that homeowners can find themselves in the frustrating situation of having three different real estate agents inspect their property, with each agent coming back quoting very different price estimates.
Real estate is a tricky asset to value because at the end of the day, it will only be worth what someone is willing to pay for it. It can be even more difficult to pinpoint a property’s value in a volatile real estate market, as other vendors’ “fire sales” can have a negative impact on the worth of your own home or investment property.
However, if you’re in the market to sell and you want to boost your chances of snagging a buyer, engaging a qualified valuer may be a worthwhile investment. In the current buyer’s market, a written, professional valuation can be a valuable tool during negotiations when a buyer is trying to obtain a steep discount.
This is because it provides you with “an accurate, independent market value, supported by well researched sales and/or rental evidence,” according to National Property Valuers. “The peace of mind that comes from knowing… that you have not undersold your property is priceless.”