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  • 3 bedrooms
  • 2 bathrooms
  • 2 parking spaces

$ 365,000
3BR T/House. One of Shepps Best
  • 3 bedrooms
  • 3 bathrooms
  • 3 parking spaces

$ 299,000
3 BR plus sep. study on 1 Tatura
  • 3 bedrooms
  • 1 bathrooms
  • 2 parking spaces

$ 250,000
In town 1500sqm land and 3BR BV home
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How are properties valued

Vendors generally get any number of different agents to appraise the value of their property prior to putting it on the market and the methods used by those agents to determine a price, is just as widely varied, as are the appraised amounts. The following is an overview of some of the different methods used.

Taking a guess
Yes it does happen

Using the CIV (capital improved value) on the rates notice
This is a method generally used by inexperienced agents and is not a very good indicator as we've seen many properties sold either way above or way below the nominated figure.

Telling the vendor any price to secure the listing
Agents do this to secure a listing with the idea of working on the vendor over a period of time to get a price reduction. (see Buying a listing)

Low Balling a price
Unfortunately this is another thing that happens and is where an agent prices a property as low as he thinks he can get away with. (I guess that the other reason agents do this is incompetence) The idea with 'low balling' a price is that the lower the property is priced, the quicker the sale and the quicker the commission is generated. We've come across had a number of examples of 'low balling', two of which are:-
Appraised price by another agent $520,000 KMRE sold the property for $605,000
Appraised price by another agent $85,000 KMRE sold the property for $135,000
As a buyer if you can find one of these underpriced properties they are certainly worth buying but unfortunately it's at the expense of the seller.

CPI method
This method really relates to the median price movement but is referred to by agents as the CPI method and is generally relied on heavily by inexperienced agents as a very simple way to get a ball park figure of todays value. Basically agents look at the date a property was purchased and the purchase price paid and then add or subtract whatever increases have occured to the median house prices in the area since that time. With this method there are also other things that need to be taken into consideration such as improvements made, changes in the local ammenities etc. Also the passage of time diminishes the accuracy of this method and trying to use this method for a purchase date greater than 4 or 5 years ago can be very innacurate. Another thing worth pointing out is that some people think that if they put in a new kitchen that cost say $10,000 then their property has risen in value by $10,000. This is not correct as in most situations there was some value attributed to the older kitchen and only the difference relates to the increase in value. This is where an experienced agent can help.

The direct comparison method
This is where agents write down a number of recent sales in the local area and then physically drive around and look at the exterior of each of those properties which are then compared to the property in question. This method is not ideal as who can tell by looking at the front of a house how big it is, how many bathrooms & bedrooms there are, is there a pool or a shed etc, etc.

The summation method
This is the method used by valuers and in our experience gives the best idea of price however unfortunately many Agents Representatives are not aware of how to use this method as it is not included in their training. So how does it work? The summation method is really just putting a value on the different parts that make up a property and adding them up. Agents using this method generally use a range which includes a low, medium and a high figure. The figures used ultimately depend on the condition of the property and quality of fixtures and fittings. The figuers used are also directly obtained from actual sales results. An example would be as follows:-

1Yr old house (price per m2)     $975           $1,000       $1,025
Land                                          $115,000   $120,000   $125,000
Landscaping                              $8,000         $10,000     $12,000
Shed                                         $14,000       $15,000     $16,000
Fencing and Driveway               $6,000         $7,000       $8,000
Pergola                                     $9,000         $10,000     $11,000

The above example is a general indication only and there are a number of variables that change with every property.

The capitalization method
This method is usually used to determine the value of commercial and industrial properties in conjuctions with the summation and direct comparison methods.
An example would be as follows:-

A factory is 400 m2 in size and would rent for $65 per metre per year = $26,000 pa. An investor would want an 8% return on this type of investment. This puts the price of the property at around $325,000.

The Turner Method
This method realtes to determining the value of a vacant piece of land which is to be used for development of building blocks or units. Basically agents work out the ultimate sale prices of what is to be developed on the land and work backwards from there by subtracting all of the costs involved in the project. This then identifies a price which a developer should be prepared to pa for the property.

So what do you as a buyer make of all this? Do your own research, become an expert in the local area and make an informed decision. You can also rest assued that properties listed for sale by KMRE agents have been properly appaised and are listed at the correct price.

NB:  If you know any person who may be interested in anything contained in this web site, please feel free to pass it on with our compliments.