Why “AutoVal” and “Free Valuation” reports can be unhelpful
If I had a dollar for every time a client forwarded me one of their “free reports” provided by their lender, broker, building inspector or conveyancer I’d be sipping cocktails in the Bahamas by now….. ok maybe the Sydney Park Hyatt, but I’m sure you get my drift 🙂
The trouble with these so-called helpful “reports” is that they can unintentionally serve to confuse buyers, causing our clients angst and questioning why our Appraisal Reports are so different to the one provided by their lender/FP/inspector. The price “ranges” provided are also often so wide as to be totally unhelpful eg: $650,000-800,000 was a recent one that a client handed onto us. Companies that currently provide such reports as add-on features to their databases include RPData Core Logic, Residex and APM/PDS amongst others.
The key to being able to accurately appraise a property, however, is a little more complicated than simply relying on nearby recent sales and churning out a computer-generated report that relies on these only. Knowing what an individual property is worth means being up to date with the often unique factors that influence price and these include:
* Location: It goes without saying that a property located on an arterial road, for example, is going to be priced differently than an identical one in a quiet street. It’s not just about the suburb but the specific position within that suburb that counts.
* Building structure and quality: These attributes play a huge part in determining value as it’s not solely about floorspace or how many bedrooms a property has. Considering the quality of the build (eg: custom-built vs project-home) the specific inclusions and fittings/fixtures all play a part in adding/detracting from a property’s worth.
* Planning restrictions and zoning: The highest land use for a property should always be taken into consideration when buying, and this can greatly influence price depending on what can/can’t be developed on a site.
* Unique factors: These can vary widely from a property’s truly rare position eg: waterfront, harbour views, through to property styles that aren’t commonly available on the market in a particular area eg: character/heritage properties, art deco, sandstone cottages etc. Buyers will often pay more for properties that have a unique quality and are considered highly sought after due to this.
* Improvements: Autoval reports can’t take any individual property improvements into consideration as they are relying on property size, features and location only in their estimations. Since their previous sale, properties are often renovated/extended and this obviously needs to be allowed for when appraising a property’s value.
* Demand vs supply: With the seller’s market that Sydney is currently experiencing, a lack of supply for a larger demand plays a part in the trajectory and pace of growth and subsequently prices. Comparing a property with a comparable sale from 3 months ago is often useless in this type of market, however in a slow or cooler market it may be fairer. Knowing what the market is doing and being able to keep pace realistically with it is imperative if you are buying. Too many buyers don’t take this into consideration or adjust their price expectations accordingly.
Next time you receive a “Free Report” remember to take the above into consideration. As useful as the databases are, they are certainly limited in their abilities to “value” a property in the real world. A statistical modelling programme is never going to be entirely accurate and should ideally be used in consultation with a professional such as a buyers’ agent or valuer, who will be able to provide a much clearer and realistic appraisal of a property.