How to value a property before buying
YOU love the property but there is no price guide for it. So how can you be confident that you are making a sound financial decision?
Good estate agents will share the results of comparable sales at open for inspections.
If they don’t, ask the agent for details of comparable sales. Check them online and consider phoning the agents that sold them to ask how they compare to the property you are looking to buy.
The more rapport you build with agents, the more they are likely to share their genuine thoughts about the value of a property.
They might also warn you about properties that look good but have some hidden nightmares that you might not discover.
It is also worth building a relationship with a property manager who is connected to the selling agent because they are more likely to give an unbiased opinion about the likely rent and selling price of a property.
Property managers have a wealth of information because they are in the market every day.
Websites such as realestate.com.au have sections of sold properties that enable you to check recent sale prices.
This is a great way to build knowledge about sales prices as opposed to their advertised prices.
Online photographs do not always show the full picture, so try to at least drive past a property to see its location and call the selling agent to get a clearer picture of its pros and cons.
It takes at least 50 to 100 property inspections to familiarise yourself with an area and to know which are the good and bad properties.
It is best to keep a spreadsheet to summarise the key features of every property, how much the agent was quoting and the sale price. Start trying to estimate the selling price and see how you perform after the property has sold.
Auctions can be a great place to find a bargain, but buyers can also be caught out if they don’t know what a property is worth.
Attend as many auctions as possible to gain a strong idea of selling prices and see how many people are bidding.
A property can sell for well beyond its reserve price for a number of reasons, but this does not mean that is what the property is worth.
You can gain an online valuation from companies such as CoreLogic RP Data for less than $100 and it will be a rough guide to a selling price.
Online valuations use statistical information such as the last selling price multiplied by the average growth in the suburb to arrive at an estimate.
A computer can’t tell if a property has been trashed or renovated, so assume that online valuations might get within
5 or 10 per cent of the true price.
Hiring a valuer to inspect the property might cost about $500 but I think it is well worth it.
Valuers have a reputation for being conservative, but if you manage to buy within their price estimate it will give you peace of mind that you are making a sound investment.
A buyers’ agent can do the property research legwork for you. Buyers’ agents have strong relationships with estate agents, and have many comparable sales to back up their auction bids.
They often buy properties before they go on the market and negotiate in a non-emotional way which is essential in a strong market.
— Chris Gray is host of Your Property Empire on Sky News Business channel and CEO of buyers’ agency Empire