How To Determine A Property Price Estimate
✅The value is not to be confused with the current listing price or the most recent offer on the property.
✅Find a trusted local agent to discuss your estimated price.
✅Be diligent and do your homework.
1. Find relevant local sales
✅Just look at other similar properties in the area you are looking to buy. There are plenty of resources like realestate.com.au, corelogic or touch base with your local agent. Look at the 'sold' price - not the listed price.
✅The properties should be compared with comparable features such as:
👉Very similar property to the one you are trying to value.
👉Within 1km of the property that you are attempting to value or the price you come up with may not hold.
👉Preferably sold recently within 6-12 months.
👉Reach out to a good local real estate agent to help you; often will do it for free.
👉You could also try a Google search for the address.
👉Perhaps you could drive past the property or use Google Street View to get a taste for the condition of the property.
2. Use comparable properties
✅Sift through the recently sold properties in your area and pinpoint the ones that are 'most' similar to your property. If you skip this step, then it is likely your price estimate won't hold much water. Look for:
👉Suburb: is it roughly the same distance from transport or amenities like hospitals and schools? Are the streets similar by nature - noise, traffic, access?
👉Property: Is it the same size? Are there the same number of bathrooms, bedrooms, car spaces, lounge rooms etc.
👉Land: is the land size similar?
👉Standard: do both properties have similar fixtures and fittings?
3. Where does your property fit within the range?
✅Be objective! Find at least 3-5 similar properties and take a guess as to which ones are inferior and which ones are superior. Ask your local real estate agent to help you; many good local agents will do this for free.
✅Rank each property on the basis of land size, location, parking, fixtures and finishes.
✅Typically the lender will value the land and house separately. There may be comments such as: "smaller land size, but superior property overall."
4. Make allowances for market swings
✅Right now in Sydney we are experiencing a 'hot' first home buyers market. So home sales over 6 months ago will not be comparable. Hence the importance of working with a good local real estate agent. Perhaps your estimate needs adjusting to reflect this market move.
✅Go to plenty of open house auctions and get a feel for how the local market is trading.
✅Utilise market data and figures to form a better price estimate. These are:
👉Median House Price: mid range for what a house is worth in your suburb. Will be less effective if your suburb is slow and not selling many houses. Be careful when using this for units; are they new builds or existing dwellings?
👉Auction Clearance Rate: what is the percentage of homes being sold before, at, or post auction? This is a great indication of current demand in your area.
👉Discounting Percentage: if a property was listed at $800,000 and sold for $720,000, then the discount percentage would be 10%.
👉Days on Market: a great indicator of demand in a particular suburb. This figure can sometimes be manipulated, so take care.
Common valuation mistakes
✅In a hot market like we're seeing in Sydney, it pays to work alongside a busy local realtor. But come up with your own price estimate to prevent you offering too much - which will then affect your formal approval with a lender. A bank has it's own metrics, and will not lend above what they see as value for an area.
✅Know the stage of the market cycle you're in: avoid paying too little trying to get a 'bargain' and continually miss each property to another more aggressive bidder.
✅Do not compare properties currently listed for sale; must use already sold data. Many sellers have unrealistic expectations and are 'testing' bidder appetite.
✅Too much realtor influence: unless your realtor comes recommended, the 'other offers' may be fictitiously designed to increase your bid. Focus on comparable sales and ignore 'other offers' as too much noise.
✅Not comparing 'like properties'. Don't take guidance from properties outside your area, size, or with different amenities.
✅Getting too emotional: sellers can be attached to their homes. It's where they raised their kids, got married, their beloved dog was buried. Buyers also get frustrated in shopping or fall in love with a property and pay too much. This may affect your formal home loan approval later if you can't come up with a greater deposit or funds to complete.
✅New properties: expect to pay more for a new build. Government subsides can affect prices for a limited period, so take this into consideration if the grants have been removed when you come to buy.
✅Listening to the media: the media is NOT a trusted source of information about property prices or trends. Focus on real statistics, not sales writing by a marketing professional. Your trusted local real estate agent could be a good source of information.
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