UK property is the gold bullion of the world’s real estate, but it takes a great deal of experience to accurately value houses (or palaces – Buckingham Palace was valued recently at £1.55 billion!).
Here are the five key steps, according to private client property advisors JMChase:
Understand the difference between price and value
Price is the figure written on the ticket or the sales brochure. Value can only be truly defined as the figure at which a buyer and a seller are prepared to exchange contracts.
Comparing properties; no two houses are the same
You need to assess at least five properties that have successfully sold and are closely comparable to the house in question on measures of architecture, internal space, external space or land, condition, aspect and importantly, location. Check how long they were in the market for, how many viewings took place and what offers were achieved. Then form an initial estimate of the value.
Will buyers actually want to buy the house? Is there more demand for a basement flat, or a penthouse apartment, a Georgian manor or a Queen’s palace? Does this depend on the condition of the property, its ceiling heights or its asking price? An accurate assessment of this point requires considerable experience of buying and selling property. Form a firm opinion of the likely demand for the property and use this to shift your estimate to within a 10% range.
Have a clear understanding of the current market conditions
Are there healthy levels of competition from buyers, or is it very much a sellers’ market? Does this depend on the type of property, or broader sentiment in the economy or more specifics such as interest rates? With a clear understanding of the market conditions you can then narrow down the range of figures to within a five per cent spread.
The small print and the exception
There will no doubt be more specific details that can have an impact on value. Lease length on leasehold properties is a good example. Check the small print and then the final valuation can be fine tuned to be as accurate as possible. The only real exception to the above steps is when a house is truly rare, such a ‘Buckingham Palace’. In this circumstance a house can be like a rare painting or a luxury item and most measures of value can be set aside. Some buyers will pay anything to secure a certain property if it is truly rare.
Otherwise it is true to say that no one is able to value a property, before it sells, more accurately than within 3% of the eventual figure. The only people who can achieve the most accurate valuations are those with considerable experience of the relevant property market; the selling agents and the buying agents.
More information can be obtained by going on-line at: www.jmchase.co.uk