select
|

Property valuations must be accurate if a fair deal is to be achieved

This year, says Schalk van der Merwe, co-franchisee with his father Johann for the Rawson Property Group’s Somerset West franchise, the importance of valuing a residential property accurately prior to buying or selling it has become more and more evident – and yet, he says, inaccurate valuations are regularly being done every week in the Helderberg basin.

“Sellers in particular”, says van der Merwe,” should always ask their agents to explain and justify how they have arrived at the valuation they have submitted. If they cannot do this in a totally convincing way with adequate back up data, it is likely that they are not true professionals and their valuations cannot be relied on.

Agents working in big well branded property groups, added van der Merwe, almost invariably have access to reputable data banks which provide them with accurate statistics which, in turn, greatly simplify the valuation process. In some of the smaller agencies, however, says van der Merwe, they do not have access to accurate market information and therefore are prone to making mistakes.

Looking back on the last decade of property marketing, van der Merwe says that before the recession, most banks and some agents relied on what is known as desktop valuations.

With these, the various criteria relating to the property and its area are considered for the assessment and an average price is then arrived at. To this additions or subtractions can be made for specific bonus or negative points such as a beautiful view or close proximity to a good school.

That valuation system, says van der Merwe, rapidly became redundant when in the 2008 to 2010 downturn, home prices fell 10 to 30% below their previous highs.

Now, he says, the property market is again in a normal trading phase, albeit now slanted to the advantage of the seller and banks, together with some agents who are again resorting to desktop valuations. These, says van der Merwe, can once again be misleading because the price rises recently have been rapid (often in excess of 10% annually) and the desktop valuers’ data is almost always related to the previous quarter which means that by the time a valuation is made today, it is already out of date.

He and his team, says van der Merwe, have found that to get a truly accurate valuation, it is necessary to use all four of the recognised valuation systems.

These estimate values on:

a.     accepted capital growth formulae;

b.     the replacement value of the home;

c.     the recently achieved sales of similar homes in the area; and

d.     the current asking prices of homes for sale in the area.

This last criterion, says van der Merwe, should take into account how long the home has already been on the market. Right now in the Helderberg, he says, correctly priced homes are selling in less than 27 days.  If, therefore, the home has “stuck” on the market for 40 days or more, there must be something very wrong with it or its price is almost certainly too high and should be discounted.

Van der Merwe says that his team, having made a good name for themselves regarding valuations, is now asked to do 20 to 30 per month. These come not only from potential sellers, but also from those planning to rent the property and achieve a respectable return in relation to its current value. In some cases, too, clients are trying to assess what their Capital Gains Tax will be if and when the property is sold. (This relates mainly to second homes, primary homes being given tax concessions.)

Van der Merwe commented that first time home buyers have been particularly prone to over-bidding for the homes they want.

“There is,“ he says “absolutely nothing wrong with bidding high for a property you really want, so long as you recognise that you are acting emotionally and not necessarily rationally and are prepared to wait for market values to catch up with the price you have paid.”


  Comment on this Article

  Please login to post comments

Post to my facebook wall
  
2000
Characters remaining


    Latest Property News
    • 17 Nov 2017
      FWJK has announced the launch of its latest residential brand, the Lil’ Apple, which will be launched simultaneously in two developments in Cape Town and Umhlanga totaling 600 apartments. The Lil’ Apple is set to be a brand of FWJK’s New York style apartments which will be rolled out nationally.
    • 17 Nov 2017
      It’s been a tumultuous year on many fronts, with socio-political uncertainty setting the tone for much of South Africa’s economic activity yet despite this and seemingly counter-intuitively, the residential property market has held up well.
    • 17 Nov 2017
      The EAAB (the Estate Agency Affairs Board) recently claimed that around 50,000 illegal estate agents could currently be operating illegally.
    • 16 Nov 2017
      Penthouses are synonymous with New York – characterised by high-rise living that is decidedly luxurious and spacious. While exclusivity comes at a price, you can still create a “penthouse” look and feel in your existing apartment or even the upstairs bedroom of a double storey house with some clever design changes and styling touches.
    • 16 Nov 2017
      The area has long been popular with kite surfers and, with escalating property prices in Cape Town itself, is increasingly in demand with home owners who work in town, but are looking to invest in more affordable properties.
    • 16 Nov 2017
      Cape Town’s popularity as a world-class tourist destination has resulted in a spike in the number of homes available for holiday lets and fuelled investor demand for sectional title units with short term rental potential.
    • 15 Nov 2017
      Sappi, one of South Africa’s oldest global companies and a leading global supplier of sustainable woodfibre products, has moved its global and regional headquarters to a new site on the corner of Oxford and 14th Avenue in Rosebank.
    • 15 Nov 2017
      There’s an old saying in real estate that you should seek to make a profit when you buy, not only when you sell – and a large part of succeeding at that endeavour is buying a home in an area with desirable features that will enhance the resale value of your property.
        
    X
    Subscribe to the MyProperty Newsletter

    Name  
    Last Name  
    Email Address  
    Email Frequency
    select
    X
    Share this Page

       
    For Sale Property
    Rental Property
    More Options
    About
    Connect with us
    FEEDBACK