In some cases, houses for sale can get listed at one price but valued at a different price and valued by the lender at an entirely different price. Of course, the selling price can be a totally different figure. This is a matter of confusion for many first home buyers, sellers and novice property investors. So, how is this possible? Capital Wealth Property decided to shed some light into this matter.
The bank’s value
If the home for sale is mortgaged or will be mortgaged, your lender has to value it. This provides the lender with the confidence that your home offers adequate security against the amount borrowed. Should you be unable to pay your mortgage, the lender can then sell the property to recover the owed amount. In reality, bank valuations are about 10% - 20% lower than a home’s selling price.
The price appraisal of the selling agent
Real estate agents also have to assess a property’s market value to help the owner set a selling price. Agents often take into account a range of factors to determine a property’s price. For instance, they will research the sales in the local suburb, town or city and come up with a price range. Additionally, they will also do a home inspection.
The final selling price
Whether a property is sold by auction or private sale, the price that the buyer pays and the seller accepts is the legally binding sale price of the property. The selling price can change due to many reasons. For instance, high demand, hot markets and a good crowd on an auction can have an effect on the selling price. In the end, it can be much different in comparison to the appraisal price and the lender’s price.
The valuation of the local council
Property owners receive their local municipal rates bill each year. This bill features the site value, gross rental value, net annual value and capital improved value. These figures are obtained with data analysis and the bi-annual figures reported by the State Valuer-General’s office. These figures allow the authorities for fire and water along with councils to determine what homeowners owe them for their services and infrastructure.
The owner’s price
Every home owner has their own price when they intend to put their property on the market. This is usually the lowest price that they will agree to. This price depends on the property’s location, features and the seller’s expectations which may be influenced by emotions.