Advice: how to determine the value of your home

Every home owner in Australia would have a rough idea of the value of their home, but an accurate estimate is essential to gain the confidence to sell, especially in uncertain times.

There are a number of ways to determine the value of a property and for most home owners, it’s best to use a combination of different methods.

Estimate

An automated price estimate uses information about the location, size and features of a property, as well as recent local sales, to provide home owners with an estimated value.

Free services like Domain for Owners can be used by home owners to understand where their property sits in the market.

Price estimates are provided as a range, and use publicly available data from past property listings and government sources, including the size of the property and the number of bedrooms, bathrooms and parking spots.

“A price estimate can be used as a starting point to determine a home’s value combined with other information like the property’s last sale price, comparable properties for sale and properties recently sold in the area,” says Domain principal product manager Christian Gillott.

Automated price estimates are most robust in areas with many recent sales, and rely on accurate data.

“Where a property does not have an estimate available, this is due to either insufficient data available for the property, or a lack of appropriate comparable sales,” Gillott says. “This can be the case for highly unique or high-end properties.”

Valuation

A valuation is a detailed report compiled by an accredited valuer who inspects the property in person, examining the aspects of the property beyond its size and location.

“A valuation has a clear methodology dictated by standards,” says Australian Property Institute chief executive Amelia Hodge. “It takes into account zoning, market conditions, the actual physical state of the property and a broad range of requirements. It’s a more objective number.”

Valuers also take into account the marketability of the property – homes with broader appeal are generally easier to sell than polarising properties.

Valuations are commonly commissioned by lenders to determine the value of a property during the home loan application process, or when refinancing. “Because it’s an established evidence-based process for establishing value, it does meet a lot of legal requirements,” Hodge says.

The downside of a valuation for home owners is the cost, usually about $500.

Appraisal

Conducted by a real estate agent, an appraisal is the price or range the agent expects to achieve if they were to sell the home, and is largely based on recent sales nearby.

“Other than comparables, you’re looking at the aspect, the opportunity to add value, and what else is on the market for sale at this point in time, whether in the suburb or surrounding suburbs,” says The Agency co-founder Shad Hassen.

The appraisal also takes into account buyers active in the local market seeking similar properties. “An agent that sells a lot in the area knows who is looking because they’ve been meeting the same buyers for weeks or months,” Hassen says.

Appraisals are free, so it’s a good idea to request an appraisal from multiple local agents, as figures can vary. “It fluctuates a fair bit, particular in tougher times, when some agents increase the appraisal amount to give them a better chance to get the listing,” Hassen says.

Multiple appraisals help home owners to determine which estimate is most realistic, and also decide which agent would be most suitable to sell their property. Agents can also suggest improvements to achieve a higher price.

“Don’t choose the agent based on their fee or their appraised number,” Hassen says. “Choose them based on their strategy.”

Testing the market

One of the most accurate ways to determine the current value of a property is to take it to market. Feedback from potential buyers – in the form of offers during the campaign or bids at the auction – will provide a realistic indication of value.

Putting a home on the market requires both a financial and emotional investment, and most home owners spend months researching their local market and engaging with agents before going ahead.

The estimated value has the greatest influence on the decision, so it’s critical that home owners spend time to truly understand where their property sits.