There are two reports your agent can supply you to help you understand how much your property is worth.
The first is called a Market Appraisal. Most agents will create an appraisal for your property as part of their pitching process when you interview them about selling your home or to encourage you to consider selling. You’ve probably seen flyers in your letter box from local agents offering to tell you “what your home is worth”.
An appraisal is typically a printed report that identifies the key style and features of your home (type of building material, land size and number of beds, baths and car spaces) and compares them to other properties that have sold recently that match those criteria as closely as possible.
It then combines that information with the agents own knowledge about selling in the local market, and comes up with a price or price range the agent believes can be achieved using their recommended sales and marketing methods.
Ask multiple agents for an appraisal and you will likely get several different prices across a range. How can that be? Surely only one is right?
The variation is due to both the experience of the agent based on the types of homes that they have used to compare with yours and their different selling methods. If your agent specialises in selling say 4 bedroom family homes, he or she may have captured sales from surrounding suburbs, while another agent may have compared your property to both three and four bedroom homes.
The thing to understand about an appraisal however is that it is an estimate – a line in the sand – that can be influenced by both agent behaviour and how the market is performing.
The second report an agent can provide for you upon request is an Automated Valuation. An Automated Valuation is a data generated report that uses algorithms similar to those used by banks and property valuers to determine the “value” of your home.
The value of your home is different to its final sales price. The value is the amount that most banks and lending institutions in Australia will lend upon under normal financial circumstances (based on a 20% deposit etc). As such, the Automated Valuation of your property will in most cases be lower than the price range stated by your real estate agent (banks being conservative creatures after all!).
The free valuation report generated by your agent is unlikely to be absolutely identical to the final valuation your bank does which will be carried out by a valuer. Every bank has different risk and lending criteria which impacts on their final valuations.
But if you are an anxious seller, it can be helpful to know what your valuation figure is if only for the security of having an understanding what the bank thinks your home is worth. It means everything over that figure is really a bonus. It’s also a good sanity check to ensure the final pricing you decide upon with your agent is not wildly above the automated valuation amount. If it is, you make obtaining finance harder for your potential buyers