How to valuate your property fairly
ACCEPTANCE If there is one factor on which estate agents can guarantee that they will encounter difficulties, says Tony Clarke, MD of Rawson Properties, it is that many sellers will find it difficult to accept the market valuation with which they are presented. “Somehow a high percentage of sellers are still living in the rosy, optimistic world of 2005-2007 when 20% plus annual increases were still possible. The plain fact that we have entered a less buoyant, more stringent era, in which supply in most areas still exceeds demand, and in which distressed sellers have caused a big drop in average prices, have not yet been fully understood.” Clarke pointed out that three different valuation methods are used — and these can give varying estimates. Most good residential estate agents, he said, will use the Comparative Market Analysis method. “With this CMA system, it is accepted that the market does dictate the price of any product — and it is on the whole futile to deny this.” The second valuation method is the cost system — which is often used by accountants and professional valuers — where the current market value of the land will be assessed by CMA but the structure and improvements will be valued on their replacement or original costs appreciated (or depreciated) at an annual rate over the life of the building. The third approach looks not at comparative sale (and asking) prices but the income that the property will generate — and is best suited to commercial property.