Measures of true worth
When you’ve lived in a property for a while, it can be hard to be rational about its worth. How can you put a price on the spot where you’ve built so many memories with family and friends? Someone will surely recognise the hours you spent on improvements, won’t they?
Unfortunately potential buyers may see things differently, especially in a moderate housing market.
There are several methods to gauge the worth of your property. Remember that the rateable value or RV (formerly known as the government valuation, or GV) of your property doesn’t really provide any clues. These valuations are done by the local council to work out what share of rates a household should pay. They are done only every three years and don’t take any improvements into account. Increasingly, properties including an RV figure in the advertising will carry a disclaimer that it’s not indicative of current market value.
Let’s say you own a large property in an area where there have been some big-ticket sales in the last year. Your property might have serious structural issues and be in poor condition, yet some websites will have you believe that it is worth a lot more than any sensible buyer would pay for it - because other houses in the neighbourhood have sold for high prices.
The impact is two-fold. The seller could anticipate a big pay-day that may never arrive; and some buyers may not make an offer because they think it’s out of their price range.
There are a couple of ways to combat this. When you start working with a real estate agent to sell your property, they must supply you with a current market appraisal or CMA. This is based on similar information to the online versions, but it also comes with the agent’s real-time, real-life knowledge of the area, what similar properties have sold for and the condition and particular characteristics of your own property.
The agent will walk through your property and identify its key selling propositions, such as good sun, proximity to desirable schools and other features buyers like.
Note that you may get varying CMA ranges from different real estate agents.
Your other option is to pay a registered valuer to provide an independent valuation. This service comes at a cost (the price will vary, depending on the level of detail), but it will be more accurate. The Property Institute, which represents valuers, says a registered valuation can help sellers be a little more clinical about their property’s worth.
However, the true indication of your property’s value is what a willing buyer will pay for it when it’s on the market.
For independent advice on buying or selling property, visit reaa.govt.nz.