Property value means different things to different people, depending on how they are involved in a real estate transaction. The Vendor’s may have an emotional attachment to the home which could have an influence when they look at the property they are selling. A Buyer, though excited about the property, will not see the same value. While the financier will be looking on the gloomy side in particular the risk, then take 20% off for good measure.
Assessed Value (Tax Office)
The tax assessor will see a very different picture. The assessor wants to create assessed value equality among the town or city’s citizens in order to fairly assess taxes and share the tax burden in an equitable manner among all property owners. Towns periodically undertake re-evaluations to update their market assessed value for all properties. While based upon historical sales data, it does not always represent current market data. It is a only useful guide in comparing the values of similar real estate properties.
The office of the Valuer General has adopted the International Valuation committee’s definition of Market Value that being:
“Market Value is the estimated amount for which an asset should exchange on the date of valuation between a willing buyer and a willing selling in an arm’s length transaction, after proper marketing, wherein the parties have each acted knowledgeably and without compulsion”.
Property Value (Valuer* for Bank Use)
Valuers must protect the interest of the lender, therefore must be more conservative in the appraisal value they place on a real estate property. The appraisal value is more typically based upon historic sales data that has a limited life and may or may not agree with market value, typically supported by recent sales figures gleaned from local real estate agents.
Property Value (Valuer* for Insurance Use) In this case a Valuer has to calculate a buildings replacement value, in case of total loss. This amount will be used to determine your insurance premium.
Factors the Valuer may take into consideration:
- how many square meters of construction area there are.
- the cost to clear the site.
- any costs relating to current building standards.
- the replacement cost of a property can vary depending on the quality of the build, fixtures and fittings.
- alternative accommodation during the construction period.
Don’t fall into the trap:
- Of using a flat square meters price to calculate the value, often does not for example take into consideration age, size, location and quality of construction and the type of terrain to be built upon.
- Thinking that another price indicator such as bank valuation or even the sale price if within the last six months must be spot on.
* Property Valuers are professionals and carry indemnity insurance in case a claim is made against them. One of the major factors considered by the insurer is recent claims.
Market Value (Real Estate Agent)
Market value is what a ready, willing, and able real estate buyer pays to a ready, willing and able seller in a transaction with no undue influences on a given day. It is a negotiated value which changes relative to the market conditions, supply, demand and season, in some cases. Market value is created by the home buyer and seller. Too often, buyers and sellers have a notion that some other factor determines market value, when in reality they have the control not only over their transaction but some bearing on future negotiations of similar properties.
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