One of the most difficult tasks for any estate agent is to conduct a property valuation. Not only is the process difficult because it requires a multi faceted approach that takes many different factors into account, but it is also difficult because delivering the news of exactly what a property is worth to a homeowner can be troublesome. Understandably owners of houses and flats have a distinct idea of what their home is worth; unfortunately this valuation is often grossly overestimated meaning that it is often the task of estate agents to disappoint homeowners.
A detailed property valuation will in many cases be a shock to a homeowner; many people believe that a property should be worth what they have paid for it and how much any renovation costs have come to. This however is the misguided way to find the value of a property, in fact original cost and any building work have practically nothing to do with a valuation; fundamentally a home is only worth what a buyer is willing to pay for it. Property is simply a commodity and like any commodity its price is determined by supply and demand. If the demand for property is less, then understandably a house will not be worth as much.
When undertaking a property valuation it is vitally important to understand how the market conditions will affect prices. However it is equally important to relate these fluctuations in prices to the quality of a home, in particular the way it is presented and its potential for expansion and renovation. As well as taking both of these factors into account, the agent must combine the previous factors with the local area, its transport links, the educational facilities and amenities more generally. Once all of these factors have been taken into account it is possible to produce an accurate and valid property valuation.
Recently values of properties have been sliding amongst an atmosphere of recession and economic turndown. This is a direct result of lenders being less inclined to grant mortgages to potential buyers and hence there are now fewer buyers on the market. The problem with having fewer buyers on the market is that there is subsequently less demand for properties and sellers then have to drop their prices in order to achieve a sale.
Understandably this works both ways for buyers and sellers, for the last ten years sellers have been in the strong position, naturally this had to reverse at some point.
As there are less buyers on the market however does not mean that the valuation process is being performed less. People are just as intrigued to see what their property is worth, especially in a changing market. Typically a valuation is made by either an estate agent or qualified surveyor, an estate agent’s value is based upon market factors whilst that of a qualified surveyor has more to do with the condition of the property. Both have their purposes although a surveyor’s valuation is the only one that will be accepted by mortgage companies.
Hopefully this article has cleared up some issues surrounding the property valuation and how it is conducted. It is also hoped that this information will give homeowners a better understanding of what factors are incorporated into the process and how they relate to eventual value.
Real estate expert Thomas Pretty looks at what is involved in a property valuation and how it is affected by fluctuations in the market.
[tags]property valuation, property valuing, property valuing method[/tags]
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