What is property value?
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:
a. 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.
b. 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 of a claim is made against them. One of the major factors considered by the insurer is recent claim.
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 of homes, 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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You’ve heard the old saying – “Location, location, location.” The real truth is these days it’s “Location, condition, and price” and price trumps every other factor.
(To you and me, the three “Ps” Position, Presentation & Price.)
Location affects the value of a home, but its price that sells a home. Oceanfront, mountainside, or penthouse, the most desirable location in the world won’t sell at the wrong price. Every property has a potential buyer, but like rock, paper, scissors, it’s sometimes hard to know which factor is going to win the showdown.
A good location will sell at a fair price. A bad location will sell at a fair price, too. It just won’t be as a high as it would be for a good location.
A home in good condition will sell for a fair price. A home in poor condition will also sell at a fair price. Again, it won’t be as high as a comparable home in better condition.
But neither location nor condition will sell any house. Only one thing does that – price.
So if you’re a seller waiting for that “special buyer” who will appreciate your faded pink and black bathroom tile, your vintage orange shag carpet and is willing to help you put your kids through college because of your real estate prowess, you’re going to have a long wait.
So if your home is represented by an agent, and it’s been on the market for a long time, chances are it’s your own fault.
Maybe you didn’t listen to your agent when he said you’re pricing your home above the market. Maybe you got mad at the first few folks who looked at your home and didn’t make offers.
When the showings stopped completely, maybe you accused your agent of not doing a good enough job.
You put the blame on everyone except where it belongs – on you. It’s not about you, what you want, or how much you need for your retirement.
It’s about the price.
Written by Blanche Evans on Monday, 20 January 2014