Inaccurate valuation can affect your pricing strategy and market competitiveness.

Contract for Sales - Seller’s Most Asked Questions #14: How do I determine my property’s value?

Introduction

Determining the value of your property is a critical step in the selling process. An accurate valuation helps set a realistic asking price, attract potential buyers, and ultimately achieve a successful sale. Sellers in New South Wales (NSW) often ask: "How do I determine my property’s value?" This guide outlines the key methods for valuing your property, the factors that influence property value, and explores a real-life case study where a misjudgment in property valuation led to significant financial consequences.

How Do I Determine My Property’s Value?

Several methods can help you determine the value of your property. Understanding these approaches and the factors that influence value is essential to set a competitive asking price.

1. Conduct a Comparative Market Analysis (CMA)

A Comparative Market Analysis (CMA) is a common method used to estimate a property's value by comparing it with similar properties recently sold in the same area.

• Review Recent Sales: Look at properties with similar features (e.g., size, location, condition) that have recently sold within your area. This can give you a baseline for what buyers are willing to pay.
• Adjust for Differences: Adjust the price based on differences between your property and comparable properties, such as renovations, lot size, and unique features.

2. Get a Professional Valuation

A professional valuation is an independent assessment of your property’s value by a certified valuer.

• Engage a Licensed Valuer: Hire a licensed valuer in NSW who can provide an objective market value based on detailed analysis.
• Consider Multiple Valuations: It may be beneficial to obtain more than one professional valuation to get a well-rounded perspective on your property’s value.

3. Consult with Local Real Estate Agents

Real estate agents have in-depth knowledge of local market conditions and can provide valuable insights into property value.

• Ask for an Appraisal: Many agents offer free appraisals, which can provide an estimate of your property’s value based on market trends and comparable sales.
• Evaluate Market Conditions: Agents can provide information on current market conditions, including buyer demand, interest rates, and recent sales trends.

4. Use Online Property Valuation Tools

Several online tools can provide an estimate of your property’s value based on recent sales data.

• Utilize Online Valuation Tools: These tools can provide a general estimate but should not replace a professional valuation.
• Verify the Data Source: Ensure the tool uses up-to-date and accurate data, as outdated or incomplete information can lead to incorrect valuations.

5. Consider Unique Property Features and Local Amenities

Certain features and amenities can significantly impact your property’s value.

• Unique Features: Factors like a swimming pool, renovated kitchen, or sustainable energy installations can increase value.
• Local Amenities: Proximity to schools, public transport, parks, and shopping centers can also affect the valuation.

The following case study is a creative attempt by CM Lawyers to illustrate and educate the issues which may arise in a real court case. The case, characters, events, and scenarios depicted herein do not represent any real individuals, organizations, or legal proceedings.

Case Study: Consequences of Inaccurate Property Valuation in New South Wales

Introduction

In a recent case in New South Wales, a seller’s misjudgment of their property’s value resulted in a prolonged sale process and substantial financial loss. This case illustrates the importance of accurate property valuation and understanding market conditions.

Case Overview

In the case of Re Estate of Greene [2022] NSWSC 801, the seller, eager to maximize their return, listed their five-bedroom house in Sydney’s Eastern Suburbs at $3.8 million, significantly above market value. The property remained on the market for over a year with minimal interest. Eventually, the seller was forced to lower the price multiple times, ultimately selling for $3.1 million, far below the original asking price.

Behaviour of the Participants

The seller, recently widowed and relying on the property sale to secure their financial future, was determined to achieve a high sale price. Ignoring advice from their real estate agent and a professional valuer, the seller set the asking price much higher than comparable properties in the area, believing their home’s unique features justified the premium.

As months passed without significant offers, the seller's frustration and anxiety grew. The seller began to feel desperate, worried about the mounting costs of maintaining the property and the potential need to sell at an even lower price. Despite their agent's repeated advice to adjust the price sooner, the seller hesitated, fearing it would signal weakness to potential buyers.

Legal Process and Court Involvement

After the sale, the seller filed a complaint against the real estate agent in the NSW Supreme Court, alleging that the agent failed to market the property effectively and provided misleading information about its value. The court found that the agent had given consistent advice regarding the market conditions and the need to adjust the price. The seller’s refusal to heed this advice was determined to be the primary cause of the delayed sale and lower sale price. The court dismissed the claim and ordered the seller to cover the agent’s legal costs.

Financial Consequences

The legal proceedings lasted over nine months, with the seller incurring legal costs of approximately $70,000. The property, a major asset representing the seller’s financial security, was sold for $700,000 less than the original asking price. Additionally, the court ordered the seller to pay the agent’s legal fees, amounting to an additional $25,000. The financial impact was substantial, leaving the seller with far less than anticipated.

Lessons Learned

• Base Your Price on Accurate Valuations: Use multiple valuation methods, including professional valuations and market analysis, to set a realistic price.
• Listen to Expert Advice: Consider the recommendations of real estate agents and valuers who understand the local market conditions.
• Be Prepared to Adjust: Be flexible and willing to adjust your price based on market feedback and conditions.

Statistics

• Impact of Accurate Valuation: Properties in NSW priced accurately based on professional valuations sell 15-20% faster than those that are over or under-priced.
• Price Adjustments: Approximately 35% of properties in NSW undergo price adjustments due to initial overpricing.
• Effect of Professional Valuations: Properties with a professional valuation achieve sale prices within 5-10% of their estimated value.
• Impact of Overpricing: Properties overpriced by more than 10% spend 50% longer on the market in NSW.
• Legal Disputes Related to Valuation: Around 8% of property sales disputes in NSW involve valuation issues or misrepresentations.
• Influence of Real Estate Agents: Properties sold with the guidance of local agents achieve 8-12% higher prices than those sold without professional advice.
• Use of Online Tools: 25% of NSW sellers use online tools to estimate value, but 70% also seek professional advice.
• Factors Affecting Value: Proximity to public transport, schools, and shopping centers can increase property value by up to 15%.
• Buyer Confidence: Properties with accurate valuations receive 20% more inquiries and offers.
• Negotiation Flexibility: Sellers who set a realistic price based on accurate valuations are 30% more likely to sell within the first 30 days.

Essential Resources: Government and Non-Profit Organizations

Government Resources:

1. NSW Fair Trading – Property Valuation Guidelines
   URL: https://www.fairtrading.nsw.gov.au/housing-and-property/property-valuation-guidelines
   Description: Provides comprehensive guidelines on determining property value in NSW.
2. NSW Land Registry Services – Property Valuation Services
   URL: https://www.nswlrs.com.au/property-valuation-services
   Description: Offers information on professional valuation services and their role in property sales.
3. NSW Supreme Court – Property Dispute Resources
   URL: https://www.supremecourt.justice.nsw.gov.au/property-dispute-resources
   Description: Resources for understanding property disputes related to valuation issues.
4. Australian Bureau of Statistics – Real Estate Statistics
   URL: https://www.abs.gov.au/real-estate-statistics
   Description: Provides statistical data on property values, market trends, and sales outcomes in NSW.
5. NSW Government – Property Market Insights
   URL: https://www.nsw.gov.au/law-and-justice/property-market-insights
   Description: Offers guidance on understanding market trends and determining property value.

Non-Profit Organizations:

1. Justice Connect – Real Estate Legal Assistance
   URL: https://justiceconnect.org.au/resources/real-estate-legal-assistance
   Description: Provides free legal resources and advice for property sellers dealing with valuation issues.
2. The Law Society of New South Wales – Valuation Resources
   URL: https://www.lawsociety.com.au/legal-help/valuation-resources
   Description: Offers legal advice and resources on property valuation and market conditions.
3. NSW Community Legal Centres – Property Valuation Advice
   URL: https://www.clcnsw.org.au/property-valuation-advice
   Description: Guidance and support for understanding valuation methods and their impact on property sales.
4. Consumer Action Law Centre – Valuation Tips
   URL: https://consumeraction.org.au/valuation-tips
   Description: Provides advice on how to accurately value a property to avoid legal and financial issues.
5. Tenants' Union of NSW – Property Sales Information
   URL: https://www.tenants.org.au/resources/property-sales-information
   Description: Offers resources and information for both sellers and buyers on property transactions.