If you want to invest in real estate, it is very important to learn how to know the real value of a property before buying it; this will enable you to make a reasonable offer and ensure you don’t pay more than what the property is worth.
When searching for a property to buy, most people take the asking price as the property’s true value which is wrong because while some properties are valued fairly, some are overvalued or undervalued. It is essential for you to personally find out if the property is worth the price. Therefore, in this guide, we will show you how to know the real value of a property before buying it.
How to Know the Real Value of a Property Before Buying
Consult a Professional Property Valuer
A property valuer is a real estate professional who can help you accurately determine the value of the property you want to buy; they will provide a valuation report based on the following:
- Development and zoning potential.
- Aspect and size of land.
- Age and condition of the property.
- Size of the building and number of rooms.
- Layout and design.
- Amenities and fixtures.
- Other unique characteristics that can impact value.
The valuation report can help you reduce the risk of overpaying for a property, and it can be used for legal and estate settlements. Lenders also require it and can even give the seller a better understanding of their property so they may decide if they want to improve its market value. This is typically the easiest way to know the real value of a property before buying it.
Get the Property Appraised
This can also help you in finding the real value of the property you intend to buy. A property appraisal helps to determine the market value of a property; it will let you know how much such property is selling based on current market trends and other sales in the area.
You can get a real estate agent to do this appraisal for you. However, people who sell their properties usually get this done before determining the price of the properties. Still, as a buyer, you can either request for the results or get it done yourself, of course, with the permission of the property owner.
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Do Your Research
If you do not want the services of a professional real estate agent or property valuer, then there are options you can explore when finding the real value of a property. One of the few ways is by getting free property reports online.
Many reliable platforms provide rich data on a specific property; they can give information on the previous sales history, estimated value, prices of properties sold in the area, details about the suburb, median sales price in the area and more. You can combine these factors to find the real value of the property you intend to buy.
Focus on the Local Area
It is also essential to look out for the recent sales near the property you are interested in; if it is in a countryside region, search for sales within a 2km distance or more, but if it is in an urban area, search within a 1km distance.
However, you should only consider sales within the last six months so the prices can still be relevant and also search for the types of properties that look like the one you are buying. If not, you won’t be able to compare the prices accurately.
Compare Similar Properties
Another effective way to estimate the true value of a property is by comparing it with similar properties in the area; this will help you determine how much such a property should be valued.
Here are some things to consider when comparing properties:
- Number of beds and baths.
- Days on the market.
- Auction clearance rates.
- The median price of the area.
- Discount percentage.
Properties have different price ranges, so there is no point in comparing a house with two beds and one bath against one with four beds and two baths. Make sure they are very similar, and consider the factors listed above to decide on the price range of the property you are interested in.
Understand the Local Property Market
When trying to know the real value of a property, you must not neglect the changes in the market. The prices of properties are subject to frequent change, so the cost of properties six months ago will no longer be relevant today.
To better understand the market, attend auctions and open house events in the area to get an idea of the current market trends. You can also speak with a real estate expert who will enlighten you on the current state of the real estate market.
When buying a property, you can’t just rely on the estimated value and price given by the seller because they are all out to make a profit. You can’t tell how much profit they plan on making, so the best thing is to figure out how much the property is truly worth.
However, you can either get professionals to help you determine its value like we discussed earlier on this guide or follow the other steps we also provided to estimate the property value by yourself. Just remember not to be sentimental about it and ensure you fully understand the real estate market.