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A property valuation is one of the most important parts of any sale or let. Price it too high, and you’ll scare off buyers & tenants. Price it too low and you’ll lose money. Both scenarios are less than ideal.

Getting a property valuation done right is essential. Not only does a valuation let you know how much your home is worth but it gives you a starting point when it comes to choosing a listing price.

If you’ve never had a property valuation done on your house, you may be wondering exactly what a property valuation is, how it works, and if you need one. Well, you’ve come to the right place. In this article, we’ll tell you all there is to know about property valuations and how to get one done so you can price your property competitively and get the best deal on your upcoming sale or let.

 

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The best way to value your property is to get an experienced estate or letting agent to do it for you. Whether you are selling or letting out your property, agents know the ins and outs. Compare agents using our search bar below and see which agent is best for you.

 

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What is a Property Valuation?

A property valuation when selling your property, is an estimate of how much a home or property is worth at the time. Valuations are often performed by estate agents and other experts in the property industry.

Numerous factors impact the value of your property from location and size to age, upgrades, and more.

Estate agents must consider all of these factors and also thoroughly examine the interior and exterior of a property before making a determination about its value. Performing a property valuation is no easy task and takes time, experience, and a deep understanding of the current property market.

Property owners and agents aren’t the only ones who benefit from the information found in a property valuation. Banks, insurance companies, lenders, and tax offices all use and refer to property valuations as well when making financial decisions and investments.

A valuation will also need to factor in what the property is being used for/its set up. For example if the property is HMO ready, then that would be more attractive to buyers looking for a rental income.

When letting out your property, a valuation concludes how much rent you can get for your property. Often known as a management appraisal, a letting agent will consider the property & local factors to determine the potential rental income you could achieve.

 

Why Are Property Valuations Important?

Property valuations are important to many people for many reasons. As a property owner, you need up-to-date information about how much your property is worth. Having this information in your back pocket can come in handy if you decide to spontaneously sell or let your home.

You need a formal appraisal to get set and agree on a realistic price with potential buyers or renters. Property valuations also play an important role when it comes time to qualify for a loan, calculate your property taxes, and apply for a mortgage. These appraisals also come in handy during divorce proceedings or the probate process.

Let’s take a look at some of these scenarios in greater detail.

Selling in the Open Market

The open market is an unrestricted and competitive market where buyers and sellers are free to engage and haggle. If you’re working with an agent, they’ll ask you for an appraisal report before listing your property.

It’s important to remember that the value of your house and the price are two different things. For example, you can sell a property for a higher price than it’s worth. However, a property appraisal helps you determine the fair market value of your property, increasing your chances of receiving multiple offers.

Fair market value is an objective price that your agent will use to create a listing price. You aren’t required to share this figure with potential buyers, but instead, use it to come up with a reasonable listing price.

Applying for a Mortgage or Insurance

If you need a mortgage or a loan, you’ll need a property valuation. Most banks, lenders, and credit unions want an official appraisal report to calculate the loan-to-value ratio before agreeing to loan you any money or accept your application. As a general rule of thumb, the ratio is lower than 80% of the property’s value.

You’ll also need a property valuation when applying for homeowner’s insurance. There are two types of insurance that require an official appraisal – cash insurance and replacement cost. Your insurance company needs to know the property’s depreciation value as well (how much it’s worth declines over time), so it can properly reimburse you if and when the time comes.

Calculating Property Taxes

Almost every property owner is required to pay local and state government property taxes. This figure is based on location since taxes vary from one region to the next. You’ll need an official property valuation and formal assessment to determine your property’s value and, therefore, how much you’re required to pay in property taxes.

Investing

Whether you’re purchasing a property to live in, let out, or flip, you need a clear picture of how much it’ll cost you and how much you stand to make. Anytime you purchase a property, it’s an investment in your financial future.

Getting a property valuation is the best way to determine these figures and help you make smart decisions. An official appraisal report can even project the property’s future value and expected depreciation so you can plan accordingly.

 

Common Property Valuation Methods

There are several ways to determine a property’s value. While online tools are easy and convenient, in-person appraisals are often more thorough and accurate. But even the process of calculating a property’s value differs from one agent or appraiser to the next. Here are some of the most common property valuation methods and how they work.

Comparisons

The best way to see what a property is worth is to compare it to similar properties in the area. An estate agent will collect data on properties in your local area that are similar to yours and see what they sold for. These comps are generally the same size, in the same location, and share many of the same features as your property.

For example, if your property has 3 bedrooms, two bathrooms, a two-car garage, and a huge yard, an agent wouldn’t compare it to a single-bedroom flat. Instead, they’d find similar homes of the same size and with the same specs and see what buyers were willing to pay.

Cost Approach

This type of property valuation is a bit more involved than just comparing your house to others in the neighborhood. The cost approach involves calculating how much it would cost to replace your exact same house in the exact same location. Essentially, it’s a matter of determining the cost to rebuild your same exact house at the current time, in the current location.

Professional appraisers and agents use a simple formula to determine this:

Property value = the replacement cost – the depreciation value + the value of the building site

Income Capitalization

This property valuation method is commonly used when appraising investment properties. Agents and professionals consider several factors when using this approach including future market trends and conditions, overhead expenses, and the rent amount. They also calculate the property’s projected future income within a specified timeframe

Gross Rent Multiplier

This is another common method used when appraising the property value of a rental property. The information found using a gross rent multiplier is extremely valuable to landlords and property investors. While this method does take future expenses into account, its main focus is on the rental amount and projected income.

Predicting rental income is easier and more accurate than trying to calculate future market trends and conditions. Using the gross rent multiplier, most property owners can get a pretty accurate assessment of a property’s value and if it’s a worthy investment.

The calculation for this valuation method is as follows:

Property value = (the purchase price/the annual rental income) – expenses

Cash-on-Cash Return

Property valuations help investors choose the best way to finance their investments. The cash-on-cash return method (CoC) helps investors calculate the most profitable option, whether it be taking out a loan or using cash upfront.

In terms of simplicity, this property valuation method is relatively simple. Appraisers divide the net operating income of the property thus far by the total cash investment to determine the risk and reward.

 

Types of property valuations

Once you decide which property valuation method is right for you, it’s time to discuss the particulars.

The two most popular methods for getting a property appraisal are online and in person. Let’s take a closer look at both and what you can expect during each appointment.

In-Person Valuation Appointment

Property valuers are also referred to as chartered surveyors. These professionals specialize in calculating and providing accurate property valuations for various properties. They then provide this information to agents, homeowners looking to sell, and property investors looking to buy.

If you book an in-person property valuation, the surveyor will visit and inspect your property the same way a potential buyer would. Most valuations are done within an hour, depending on the size of your property and how many questions you have. The surveyor will inspect both the inside and outside of your home, paying close attention to things like the layout, square footage, upgrades, and the general condition of the property.

External factors include the location, neighborhood, and current market. Surveyors will choose the most appropriate appraisal method depending on the type of property it is and what you plan to do with it. Most valuers use either the cost approach or sales comparison for residential homes, and the gross rent multiplier, income capitalization, or cash-on-cash return approach for rentals and investments.

Online Property Valuations

Since the Covid-19 pandemic and beyond, online property valuations are becoming increasingly popular and convenient. Tools like Nationwide’s house price calculator or Zoopla’s valuation tool are proving popular with sellers.  While they’re not as accurate as in-person valuations, they can still provide valuable information to help you plan your financial future.

Agents use digital tools like Skype and Zoom to view properties from anywhere in the world. Even before the pandemic, this was a popular appraisal option for new construction builds and properties overseas or in other regions.

Without being able to visit the property in person, an online property valuation is fairly limited. Instead of seeing the property first-hand, surveyors rely on pictures, videos, and the property’s written description and specifications to create their formal assessment. Online valuations don’t allow for a thorough inspection of all areas of the property, however, in a pinch, these types of valuations provide a rough estimate and baseline of what your property may be worth.

Most likely, you’ve seen estate agent adverts on your Facebook or Instagram feed, where agents offer to provide you an instant valuation of your property.

It’s not just online agents like Purplebricks that use online property valuation tools. Traditional agents such as Foxtons, Leaders & Chestertons have adopted online tools to help clients. On the rental side, online letting agents depend on online property valuations to judge how much rental income can be achieved. It is important to note that most online property valuations will use the underlying technology of a specific software company, such as ValPal or LeadPro.

Estate agent websites are designed to get sellers & landlords to use their services or leave your personal details for future contact. So you’ll find that in exchange for an online valuation, the tool will ask for your contact details and you’ll likely get a call from an agent who will give further insights on your property.

 

What Do Valuers Look at During a Property Valuation?

There are several key features of a property that a professional surveyor will examine and consider when determining its worth. Knowing what factors influence the value of your property could give you a more realistic picture of your financial future. You can also make any necessary changes or upgrades to the property prior to the valuation to increase its value.

The Interior of the Property

During a property valuation, most appraisers will start on the inside. An interior inspection will include everything from recent upgrades and amenities to the appliances, storage space, and room size. The surveyor will inspect every room in the house, including the attic, basement, any additions, utility rooms, and other add-ons.

The valuer will also examine the home’s structure and its overall condition and appearance. Professional appraisers are experienced in building codes and other certifications that both rentals and residential homes need in order to sell or let.

The Exterior of the Property

The condition and appearance of the outside of your property are equally as important as the interior. In fact, curb appeal plays a huge role in landing a sale or attracting potential tenants. In terms of value, property surveyors will inspect the structure itself and the size of the lot. However, the most important factor in determining the property’s value is the location.

Professionals will consider how close the property is to important amenities like quality schools, hospitals, public transportation, parks, and shopping centers. They will also evaluate the overall look of the neighborhood and its atmosphere to ensure it’s safe and clean.

The local crime rate can play a crucial role in your property value. Properties located in high-crime areas may see a significant dip in value. Other factors include the state of the current market and supply and demand.

Other Features to Consider

In addition to the basic features inside and outside the property, appraisers will also consider a few other factors when calculating their final valuation. These are known as general factors and are used to describe anything that may cause fluctuations in the property’s value in the future.

These include everything from social and global economic trends to environmental conditions and governmental regulations. The risk of natural disasters is another consideration. For example, properties located in flood zones or areas prone to earthquakes, tornadoes, or hurricanes may see a dip in value compared to those in safer locations with milder weather.

Increasingly, inline with UK regulation, energy efficiency is a factor when assessing a property’s value. New regulations require more investment to bring property up to government standards. The current state of your property’s efficiency will therefore impact the value.

 

Where and How to Get a Property Valuation Done

There are a few approaches to requesting a property valuation. The fastest and most convenient way is to use a free online valuation tool. These tools are available to anyone and only take a few minutes to complete. Simply fill in the required information, including a description of the property, its location, and other specifications, and voila! The website will generate a relatively generic, ballpark figure of what your home is worth or how much rent you can get.

Although these property valuations are fast and convenient, they’re not the most accurate. If you want an in-person valuation you have a few different options. Start by asking your estate agent (if you’re working with one) if they have the experience to perform their own valuation or if they can refer you to a reliable surveyor. If you’re applying for a mortgage or loan, the lending company will provide an appraiser for you. You can also search and hire an independent valuer at your own cost.

Online valuations can be done instantly, whereas in-person appraisals require an appointment. You can schedule this through your lending company, or agent, or by calling the surveyor’s office yourself. Choose a date and time that works for you and when you’ll be home or available to answer any questions related to the property.

 

Things to Keep in Mind

Getting a property valuation isn’t without caveats. Just because an appraiser says your house is worth a certain amount doesn’t mean you’ll get an offer. Some lending companies may also lowball your home’s value, keeping you from getting the financing you need.

Here are a few pitfalls and considerations to keep in mind when requesting a property valuation.

  • Estate agents who over-value your property in the hopes of getting hired
  • Lending companies who undervalue your property in order to provide fewer funds
  • Inaccurate online property valuations that are too generic
  • The need for costly repairs or upgrades to get the price you want
  • A property valuation that is much lower than you expected

It’s important to keep an open mind when requesting a property valuation and trust the process. While these figures aren’t set in stone, professionals in the industry have valuable experience and knowledge about the property market. Most estate agents know how to properly price and market a home. If you’re still not comfortable with the results of your valuation or listing price, don’t be afraid to speak up, ask questions, or get a second opinion.

 

FAQs About Property Valuations

Do you still have questions about the property valuation process? You’re not alone. Here are some of the most frequently asked questions about getting a property valuation.

Do I Need to Attend the Valuation?

The short answer is, no. You don’t need to be present during your property valuation, however, it can be beneficial. There’s no one better to answer questions about the property than you. If the appraiser has questions about repairs, current renovation projects, upgrades, or defects, you can quickly and accurately provide this information on the spot. You can also ensure they view and document all the property’s amazing features.

How Do I Prepare My House for a Property Valuation?

While your property will ultimately speak for itself in terms of value and worth, there are a few things you can do to prepare for your property valuation.

Similar to preparing your property for a showing, make sure each room is neat and organized. The more the surveyor can see, the more accurate their appraisal will be. Tidying up the property also creates the illusion of a larger space while also highlighting the property’s key features and details.

Give the property a “once over” and see if it needs any obvious repairs or upgrades. This includes the exterior of the house too including landscaping, walkways, and the home’s siding or paint. Make sure there are no safety hazards present and that the outside of the property looks as good as the inside.

You should also have all the necessary documents and paperwork on hand. This includes things like building plans or blueprints, leasing contracts, and maintenance charges. Having both your documents and contents organized and in order helps simplify the appraisal process.  Don’t be afraid to ask questions before, during, and after the property valuation. The more you understand the process, the more informed a decision you can make about your financial future.

What Happens After the Valuation is Complete?

Once the property valuation appointment concludes, you can expect your full valuation within a week. At this point, if you’re applying for a mortgage or loan, you will receive an official offer. Don’t be surprised if your property is appraised lower than you expected. If this happens, don’t be afraid to ask why or try to challenge the property valuation using concrete proof.

If you’re applying for a loan or mortgage, the lending company will assign you a surveyor. Once you receive the results, if you don’t agree with their assessment, you can get a second opinion. This would require you to hire an independent appraiser that has no affiliation with the lending company. While this would result in out-of-pocket costs for you, it may be worth it if the new property valuation is significantly higher.

Are Property Valuations Free?

Speaking of costs, you may be wondering how much a property valuation costs. As of this writing, an in-person property valuation can cost you between £150 and £1,500. However, there are ways to get a valuation for much less or even for free!

When you first decide to sell or let your property and agree to work with an estate agent, they will provide a free upfront property valuation. This gives the agent a clear idea of what the property is worth so they can price it competitively but reasonably and start advertising it. Of course if you decide to use that agent to sell your property, you will usually incur an estate agent fee. There are online agents such as Mashroom or Strike which offer to sell your property for free, such agents hope you use some of their other products such as mortgages & insurance.

One way to guarantee you get a free property valuation is to use free online tools. Although these property assessments aren’t quite as accurate, they still provide valuable information using cutting-edge digital algorithms. Most of these tools are easy to find and use. They’re also available to anyone, meaning you don’t need to be an estate agent or landlord to find out the value of your property. All you have to do is enter specifications about the property including the size, location, and a brief description and let the free online valuation tool do the rest.

 

Get a Property Valuation Today and Start Planning Your Future

Whether you’re looking to sell your property, let it out, or invest, knowing its value is crucial. You can’t make smart financial decisions until you’ve gathered all the necessary information. And a property valuation can help you do exactly that.

Ask your agent if they offer valuation services or can refer you to a trusted surveyor. You can also use a free online tool to get a better idea of where you stand and start planning your financial future.

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