What is a Property Appraisal and Do You Need One?

If you’re considering selling your home or just curious to know what your property could potentially be worth, then a property appraisal is a great way to find out. So, what is a property appraisal?

A property appraisal is the process by which a real estate agent estimates the value of your home in the current market, based on a thorough inspection of your property. To reach their appraised value, real estate agents generally consider the following:

• The property’s size
• Number of bedrooms
• Fixtures and fittings
• The condition of the property
• The features of the property
• Location / local area
• Access to local amenities such as schools, shopping centres and transport
• School zone boundaries
• Recent sales data i.e., recently sold properties of similar size and condition in the same market
• Market conditions
• The time of year the property is likely to be sold
• The economic environment e.g., interest rates

It is important to remember that a property appraisal is just an estimate or an educated judgement regarding the potential value of your home. Appraisals have no legal standing and many real estate agencies offer this service free of charge.

What is the difference between a property appraisal and a property valuation?

Whilst a property appraisal is an estimate of a property’s market value and is usually conducted by a real estate agent free of charge, a property valuation is a legally binding report generated by a qualified valuer that has completed formalised education and training. Valuations are carried out when a definitive value is required, such as for deceased estate settlements, partnership

settlements, or when a buyer is trying to obtain finance from a lender. A fee is usually charged for property valuations.

Bank appraisal vs real estate appraisal

When you purchase a new home, your chosen bank or financial institution will most likely hire an independent licensed professional to perform a property valuation as part of the loan approval process. They do this to ascertain the property’s value, to determine how much money they should lend you. Bank appraisals / valuations are generally a conservative estimate of the property’s value, as banks are interested in knowing how much they are likely to sell the property for if it needs to be sold quickly, in the event that the buyer can no longer make their mortgage repayments. Bank appraisals / valuations are more useful to the bank / lender than they are to the buyer, and a cost is usually involved for this service.

A real estate appraisal, however, is a real estate agent’s informed opinion about the potential market value of a property. The agent uses their knowledge of the local area and recent sales data to provide a guide as to how much the property may sell for. People generally request appraisals when they are planning to sell their homes and are after a feel for the local market.

What information should be contained in an appraisal report?

A property appraisal report will generally include the real estate agent’s estimated value of your property based on their knowledge of the area, the current market, and the property itself. Supporting documentation is also usually included such as comparable sales evidence from the previous 90 days and an overview of wider market conditions.

What is the purpose of a property appraisal and do you need one?

Property appraisals, whilst not definitive or legally binding, do serve a purpose. They provide you with an estimate of how much your property may sell for in the current market, and can in turn shed some light on how much you can potentially afford to spend on your next home. Property appraisals are also useful for those who are not sure whether it is the right time to sell, and for those that are interested to know how much value, if any, recent renovation work may have added to their property. They can also help homeowners to identify ways of boosting their home’s value. Whilst property appraisals are not essential when selling your property, they can help you to gain a better sense of its market value, and assist in identifying the major selling features of your home, and how best to maximise these.

Appraisal services

When having your property appraised by a real estate agent, it is important that the agent is familiar with your suburb’s recent sales results and real estate trends, in order to be provided with an accurate and informed estimate.

You can also obtain an estimated value of your home from a property data provider, such as ‘Core Logic’. They can generate a property profile report for you, which usually contains the property’s estimated value and value range, the property’s listings history, recently sold properties in the area, suburb insights, local amenities, rental history, and development permit activity where available. Whilst accessing a report like this directly from a property data provider can come at a cost, some mortgage brokers offer these reports for free as a value-add service.

• SHARE