Appraisal Vs Valuation For Property

What is a property appraisal?

A property appraisal is an estimated value of a property in the current market. Unlike a full valuation report, it is not a legally binding document. Still, it can help indicate how much you could expect to get when selling your property.

What is a property valuation?

A property valuation is a detailed and objective analysis used to determine the exact market value of a property. It thoroughly examines all relevant data and is formally recognised in various legal and financial contexts. Valuations are generally essential for getting a home loan and making other legal and financial decisions, such as fulfilling tax obligations and managing estates.

How do property appraisals work?

Real estate agents are constantly being asked, ‘how much is my home worth?’ and an appraisal is designed to answer that question in some detail as quickly and painlessly as possible using all available information, internal and external.

The process of appraising a property can involve or all of the following:

data on recent sales in the area over the past few months
what the property has previously sold for
current market conditions
wider market trends
location
size and number of bedrooms
condition of the interior and yards
the need for renovations
any local council restrictions
access to amenities, such as schools and shops.

Once the agent has considered all the relevant factors, they will prepare a report, much like a full property valuation, including a figure that can then be used as a sales target.

An effective agent should also be able to point out any areas needing improvement that will be cost-effective regarding sale time. Enhancements could be as mundane as a general clean-up of the front and back yards involving mowing the lawns and snipping the hedges to adding a coat of paint to a tired-looking bedroom to a full-blown kitchen or bathroom renovation.

How accurate are property appraisals?

Property appraisals are more accurate than desktop or kerbside valuations because they involve a physical examination by a licensed real estate professional. However, they are still an educated guesstimate because they don’t involve anywhere near the same level of scrutiny that a full property valuation carried out by a certified valuer does.

They are also in no way binding and you can use the information to charge more or less for your property if you feel so inclined.

How (and when) to get a property appraisal

Getting a property appraisal is a relatively straightforward process that involves contacting a real estate agent in your area and booking an appointment for them to come and look over your property. Appraisals are nearly always free (if an agent wants to charge you, then find another one) and shouldn’t take more than a couple of days to complete.

The home inspection itself usually takes about an hour or even less, depending on the property’s size, layout and complexity. It may take longer if there are apparent issues, which the agent should discuss with you during the inspection. You can use this time to ask the agent about their experience working in the neighbourhood and similar properties they may have sold or recently listed.

The agent will then come back to you with an appraisal document that includes notes from their inspection and data pertaining to recent sales and the state of the market.

Appraisal vs valuation: Which one do you need?

A property appraisal is a useful first step for anyone wanting to sell a property and looking for a price guide in the current real estate market. They can also be a valuable source of feedback if you want to renovate to get a higher price when selling but are unsure whether the added investment is worth it.

An appraisal is also helpful if you want to know how much equity you have in your current home and you want to refinance or buy an investment property. However, most lenders will require more comprehensive documentation in the form of a full valuation report before they increase their loan amount.

Property valuations and appraisals have similar features designed to provide a market value for your property. Therefore, an appraisal from a reputable, experienced real estate agent should come close to the accuracy of a full valuation.

However, it’s important to understand that a property appraisal does not carry the same weight as a full, legally binding valuation. It should only be taken as a guide if you’re a seller because, when all is said and done, an appraisal is just an educated guess about what your property may sell for. It is also not relevant for taxation or estate-planning purposes in the same way that a valuation is.

It’s also important to understand that outside influences can sometimes spoil a real estate agent’s appraisal. For example, conversations with prospective buyers about what they are willing to pay may incentivise an agent to make a sale. For this reason, it may be worth getting more than one appraisal. As long as you’re not pressed for time, you’ve got nothing to lose if you’re not happy with the first appraisal.