The ultimate guide to property appraisals

What is a property appraisal?

We are often asked ‘should I sell now?’ Or ‘when is the best time to sell my home?’ While there are some seasonal factors people often believe come into play, there really is no right answer to this question.

What is a property appraiser?

A property appraiser is a licensed real estate agent, a professional who estimates the market value of a property. These appraisals play a crucial role in real estate transactions, providing homeowners with a potential selling price for their property. However, it’s important to note that they are not legally binding and are not used by banks for lending purposes - that's the role of a property valuer.

For an appraisal, real estate agents use their knowledge of the local market and professional judgment to provide an estimated market value, aiding homeowners in pricing their property appropriately for sale so they can understand their worth or the market better.

When is property appraisal a good idea? 

A property appraisal is an important step when you’re preparing to sell your property, providing you with a clear understanding of your property's current market value. This allows you to set a realistic asking price and gives insight into the local market conditions, demand for properties like yours, and possible competition.

But that’s not all a property appraisal can help with. It also:

• Helps you make better financial decisions. It can help you make better financial decisions. Knowing how much your house is worth gives you a better understanding of your overall net worth. This can help when making significant financial decisions, such as planning for retirement, assessing your investment portfolio, or refinancing your mortgage.You live in a hot seller’s market and want to capitalise on the strong market conditions.
• Allows you to align your renovation with local buyer must-haves. Before renovating, a property appraisal can give you insight into the features and amenities that local buyers seek. This can ensure you invest in improvements that increase your property's appeal and potential market value.The kids have moved out, and you want to find a home more suited to your current lifestyle needs.
• Shows you the impact of recently completed renovations on your market value. If you’ve invested time and money into your home improvements, a property appraisal can indicate how these upgrades have impacted your property’s value once you're finished. If you’re then selling, this information becomes a great marketing tool.You want to profit from recent home improvements.
• Gives you an indication of how market fluctuations have impacted your property value. The real estate market is volatile, with many ups and downs. A property appraisal can help you gauge the impact this has had on your property’s value, allowing you to make informed decisions about selling or renting your property to ensure you optimise returns.
• Indicates the investment potential of a property. If you’re looking to invest, you’ll want to find out if the property you’re interested in is hot (or not). A property appraisal can provide valuable insights into the local market and demand for that particular property type, and you’ll discover what others are paying for similar properties and what their returns are on rent.

Factors influencing property appraisals

1. Size of the property

The size of the property plays a crucial role in determining its appraisal value. During an appraisal, the real estate agent will assess the overall land parcel, structure, and size of individual rooms. By comparing these measurements to similar properties, they can provide a more accurate market appraisal value.

2. Number of bedrooms

The number of bedrooms in a property is an essential factor that affects its value. Generally, having more bedrooms tends to increase the value of a home. However, it's also crucial to consider other aspects, such as the size of the bedrooms and additional features like views, built-in wardrobes, or ensuite bathrooms.

These factors collectively influence the appraisal value of residential properties in Australia and give homeowners a better understanding of how the number of bedrooms contributes to their property's worth.

3. Hardware and furnishings

The impact of hardware and furnishings on property valuation varies depending on the specific items involved. While particular hardware and furnishings may be considered, others may not significantly affect the valuation. Factors such as the hardware's desirability, condition, and functionality can influence its consideration in the overall property market value.

4. Areas for improvement

Certain factors can influence property appraisals, particularly when considering comparable sales. Comparable sales, also known as "comps," refer to recently sold properties in the same area with similar size, location, and condition characteristics.

Real estate agents assess these sales to determine the market value of a property. Experienced agents understand buyer preferences and can offer guidance on improving a property's value based on insights from comparable sales.

Simple upgrades, such as bathroom fixtures, fresh paint, and addressing minor imperfections, can be cost-effective methods to increase the property's valuation significantly. Analysing comparable sales in the area helps real estate agents ensure a more accurate assessment of the property's worth. You could also consult your local real estate agency for a house inspection to see if they can find any areas for improvement.

5. Location and ease of access

The property's location plays a significant role in the appraisal process. Real estate agents consider factors such as the property's proximity to the street, school catchment areas, availability of public transport, and nearby amenities and attractions. Achieving a balance between convenience and other factors is crucial, as local buyers also influence the assessment.

Ease of access is another essential aspect, encompassing utilities, vehicle access, and entryways. Considerations may include the presence or absence of stairs and the availability of on-street parking. The accessibility of property influences its desirability, particularly for potential buyers with specific needs or preferences. Real estate agents will also evaluate the property's street appeal.

6. Construction quality and state

The structural integrity of a property significantly impacts its valuation and appraisal. A solid building with no cracks, dampness, or foundational issues tends to have a higher value. The age or modernity of a home is not the sole determinant. If the fundamental structure is sound, buyers are often willing to invest in updating it to their preferences.

7. General appearance and interior design

The overall presentation and interior design can impact its value. Some buyers prefer properties that require renovations, while others are attracted to well-staged homes. Real estate agents often utilise furniture rentals and stylists to enhance the visual appeal of a property and increase its appraisal value.

It’s worth considering the potential impact of selling costs on the final sale price when deciding whether to stage the home with personal belongings or rented furniture. Seeking advice from your real estate agent can help determine the best approach for selling your property. Creating an inviting atmosphere allows buyers to envision themselves living in the space.

8. Zoning and limitations

Determining the value of a property involves more than just assessing market conditions and real estate news. Another vital factor to consider is future-proofing, which refers to the property's ability to adapt and withstand potential changes or advancements in the future.

Zoning regulations and limitations play a significant role in property appraisals and can serve as deal breakers for many individuals. These regulations dictate how the property can be used, the types of structures that can be built, and any restrictions on future modifications.

Prospective buyers seek properties that offer room for growth and the ability to accommodate their evolving needs. The ability to expand the property not only provides flexibility but also allows buyers to maximise their investment over time.

9. Real estate climate and recent local sales

Understanding the real estate climate and recent local sales is crucial for property appraisals. During the appraisal process, a real estate agent examines similar properties recently sold in the area.

Property value is influenced by more than just recent local sales data. Buyers' personal preferences and emotional attachments can also impact their willingness to pay above the current market value.

To accurately evaluate a property's value, it's critical to consider objective data, like recent sales, and subjective factors, like personal preferences and emotional attachments, which can vary among buyers and influence the value people are willing to pay.

Related: How to review the performance of your investment property

What information does a property appraisal include?

When you decide to get a property appraisal, you will receive a comprehensive assessment of your property's market value, including the following:

1. Property assessment:

A real estate agent will inspect the interior and exterior, noting its features, condition, and any unique selling points. This includes the size of the property, the number of bedrooms and bathrooms, the overall layout, and the quality of construction. This information will all be noted in your appraisal document.

2. Location analysis:

A property appraisal includes an in-depth analysis of your property's location and its proximity to amenities, schools, public transport, shopping centres, parks, and other essential facilities.

While we expect some seasonality in the housing market will remain over the long term, we may find the changes between the seasons less dramatic

3. Recent comparable sales:

To provide a more accurate estimate, the real estate agent will research and analyse recent comparable sales, based on properties in the same area that have been sold recently and share similar characteristics with your property.

4. Estimated price guide:

Based on these three factors above, you will be provided with an estimated price guide. We believe your property would be valued at this approximate range in the current market. While the price guide is not a guaranteed sale price, it is a valuable reference point.

You might also be advised on enhancing the property's appeal to potential buyers, suggestions for repairs or improvements that could increase its value, and strategies to help your property stand out in a competitive market.

Propety appraisal vs. property valuation

A property appraisal and valuation might be similar in purpose, but there are key differences in who conducts them and their legal standing.

To start with, a property appraisal is typically conducted by a real estate agent and provides an estimated market value or selling price for a property. This "estimate" is based on the agent's knowledge of the local market and recent sales of comparable properties. An appraisal is not legally binding, however. And it's often simply used by homeowners to get an idea of the price they might be able to achieve.

On the other hand, a property valuation is completed by an authorised appraiser, also known as a Certified Practicing Valuer. It is a detailed and systematic assessment of a property's worth. It is independent and unbiased, and the resulting valuation report is legally defensible and recognised by courts and lending institutions.

It is important to note that property valuations are usually lower than an appraisal as they do not take into account buyer emotion or market conditions. Prices are more conservative given they are used by banks for lending and are legally binding. Financial institutions commonly seek valuations for home loans and individuals involved in deceased estates, settlements, or assessing capital gains tax.

An appraisal provides an estimated market value, based on local knowledge and recent sales. It's not legally binding but guides homeowners on potential selling prices.

Property valuation methods used in appraisals

There are five distinct property valuation methods, two of which are used in property appraisals in Australia to determine the value of real estate. These methods include:

1. Sales comparison approach: Comparing the subject property with recently sold properties of similar size, condition, and location.
2. Income approach: Evaluating the property's potential based on rental income, occupancy rates, and operating expenses. This method is used for commercial and investment properties.

Methods used only for valuations

In addition, three further methods are used solely in valuations:

1. Cost approach: Estimating the property's value by considering the cost of replacing it with a similar property, accounting for depreciation.
2. Gross realisation method: Used for property development projects, estimating the value based on projected revenue minus costs and profit.
3. Summation approach: Valuing each income component separately for properties with multiple income streams, such as shopping centres or mixed-use developments.

While the first two can be completed by real estate agents, only qualified and licensed valuers can apply the final three methods to ensure objectivity and adherence to industry guidelines. Valuations in Australia are regulated by professional bodies like the Australian Property Institute (API) and follow International Valuation Standards (IVS).

Related: Find out the current market value of your property

The process of property appraisals

The process of a property appraisal is invaluable. It objectively assesses a property's worth, which helps property owners make better-informed financial and selling decisions. Property appraisals are specifically for sellers (compared to valuations that are also used by buyers and lenders).

This process involves several steps:

1. Data collection: Real estate agents collect relevant information about the property, such as its size, location, features, and recent comparable sales in the area.
2. Property inspection: The agent visits the property to assess its condition, quality, and any unique characteristics that may affect its value.
3. Market analysis: Real estate agents analyse market trends, including recent sales data, supply and demand dynamics, and economic factors that impact property values.
4. Applying valuation methods: Various valuation approaches are utilised, such as the sales comparison approach and income approach, depending on the property type and purpose of the appraisal.
5. Value determination: The real estate agent determines the property's estimated value based on the collected data and valuation methods.
6. Report generation: A detailed appraisal report is prepared, summarising the appraisal process, the data used, the valuation methods applied, and the final estimated value of the property.
7. Review and validation: The appraisal report may be reviewed to ensure accuracy and compliance with industry standards.

It's important to note that the property appraisal process may vary slightly depending on the specific requirements, property type, and applicable regulations in different Australian states and territories.

Related: Guide to selling my house or apartment in NSW

Challenges and limitations of property appraisals 

Challenges and limitations are inherent in property appraisals due to the complex nature of determining property value. Some key challenges and limitations include:

Challenges

• Subjectivity in the appraisal process due to professional judgment and interpretation.
• Influence of market fluctuations that may affect property values over time.
• Limited data availability or lack of accurate data for reliable appraisals.
• Real estate agents can have difficulty finding comparable properties for unique properties.
• Variations in agents' expertise and experience impact the appraisal quality.
• Legal and regulatory considerations add complexity to the appraisal process.
• Time and cost constraints associated with completing appraisals.
  
  

Limitations

• Property appraisals provide estimates of the property price rather than precise values.
• The purpose of the appraisal can affect the approach and methodology used.
• Appraisal reports document the process and value determination.
• Appraisal fees vary based on property type, complexity, and location.
• Property values may change over time, requiring updated appraisals.
• Property improvements after an appraisal can affect the property's value.
• Dispute resolution mechanisms are available for appraisal disagreements.

It is important to seek legal advice and conduct thorough due diligence when engaging in property appraisals to ensure compliance with applicable laws and regulations and to mitigate potential risks or disputes.

Related: Buying a house or apartment in NSW eBook 

9 tips for preparing for a property appraisal

When it's time to sell your house, preparing for a property appraisal is important because it contributes to a more accurate price estimate and facilitates a smoother process for buyers and sellers. Adequately preparing increases the likelihood of receiving a fair assessment.

1. Clean and declutter

Ensure your property is clean and tidy before the appraisal. Remove any clutter or personal items distracting from the property's features, which will help local buyers visualise all of your home's excellent features.

2. Complete necessary repairs

Address any visible issues or repairs that can affect the overall impression of the property. This includes fixing leaky faucets, repairing damaged walls or flooring, and ensuring all appliances are in working order.

3. Enhance curb appeal

Before you put your home on the market, make a positive first impression by sprucing up the exterior of your property. Trim the landscaping, mow the lawn, and consider adding fresh flowers or plants to create an inviting atmosphere.

4. Organise important documents

Gather relevant documents related to the property, such as property title deeds, renovation permits, and any warranties or guarantees for appliances or major systems. Having these documents readily available can provide valuable information to the home appraiser.

5. Make a list of recent improvements

Note down any recent renovations, upgrades, or improvements made to the property. These recently renovated upgrades can include kitchen or bathroom renovations, new flooring, energy-efficient installations, or any other significant enhancements.

6. Research recent sales and market trends

Familiarise yourself with recent comparable sales in your area to gain insights into the local market. This information can help you better understand the property's value and provide valuable context during discussions with the agent.

7. Be prepared to provide information

During the appraisal, be ready to provide information about the property, such as the year of construction, square footage, number of rooms, and any unique features or amenities that set your property apart.

8. Accompany the agent

Be present during the appraisal to answer any questions the real estate agent may have and provide additional context about the property. Your presence can also help ensure that all relevant details are considered during the appraisal process.

9. Take notes and ask questions

Pay attention to the agent's observations and ask questions if there is anything you need clarification on. Taking notes can help you remember important details discussed during the appraisal.

Related: Guide to property investment success in NSW

How long does a property appraisal take?

The property appraisal process typically takes around 48 hours, including the time for the real estate agent to conduct the appraisal and provide you with the appraisal report. The actual property appraisal takes approximately an hour, depending on the size of your property.

During the appraisal, the agent considers various factors such as the property's features, size, location, recent sales, current listing prices, and buyer demand.

Do I need to prepare my property for an appraisal?

Unlike open days, inspections, and marketing campaign photography, there won’t be a stream of potential buyers looking at every detail of your home during a property appraisal. Agents know how to see past the lived-in muddle of a busy household, so there is no need to style your home for an appraisal, though you’ll undoubtedly want to ensure it’s looking its best regarding the actual selling.

Sharing as much information as possible with the agent is a great idea. Details of work done to the property, including invoices or other documentation, and up-front information about any problems you might have had will help the agent give you a far more accurate property value estimate.

A property appraisal is also a great time to ask the agent any question about the local and wider property market, who they see your buyer could be and what they would suggest you do to your property to ensure it achieves the best possible result.

What will I receive after I've had a property appraisal?

The whole reason you’re having a property appraisal is to get a clear understanding of the potential value of your home in current market conditions. Your agent will provide you with exactly that, along with a comprehensive report detailing the information they’ve based their value estimate on. They will also point out any areas that could be improved and offer guidance on optimising your property for sale if that is what you plan to do.

How much does a property appraisal or property valuation cost?

Real estate agents often provide courtesy property appraisals, allowing buyers and sellers to seek multiple appraisals to compare their approach and expertise. While the cost of a property appraisal can vary, here are some approximate ranges for different types of appraisals in Australia:

• Real estate agent appraisal: This is typically provided free of charge by local real estate agents as a courtesy service to property owners.
• Certified valuation: If you require a formal valuation conducted by a certified valuer, the cost can range from around $300 to $600 for residential properties. The exact cost will depend on the property's location, size, complexity, and the valuer's expertise.
• Specialised valuation: For more complex properties or specific purposes such as commercial or industrial properties, development sites, or specialised assets, the valuation cost can be higher and may vary significantly. It's advisable to consult with a qualified valuer to obtain a specific quote based on your unique requirements.

The cost ranges are general estimates and can vary based on location, property type, market conditions and individual valuers or agencies. Consider contacting multiple valuers or agencies to compare their fees and services and choose the one that best suits your needs.

Looking to get a property appraisal?

At DiJones, we're committed to putting people first and empowering you to make informed decisions. Whether you're considering buying or selling, our award-winning real estate company is here to assist you every step of the way.

With consecutive Residential Agency of the Year awards and a Wellbeing Initiative of the Year finalist, our exceptional service and commitment to clients have been acknowledged and celebrated. We prioritise our employees' well-being, ensuring they deliver exceptional service and innovative technology for a personalised experience.

If you're considering selling, request an appraisal and an assessment of your property to discover your property’s worth; trust DiJones to help you achieve more of what matters to you. If you're a buyer, let us assist you in finding the perfect property that aligns with your vision and goals. See more of your real estate dreams come true with DiJones, the real estate company that puts people first.

A final note if you are selling your house or apartment

If you are selling your house or apartment we hope you found this guide useful. Of course, our team of real estate agents are ready to talk to you about your property and to answer any questions you have.