The Expert Approach: How Estate Agents Value Properties
by Property Investments UKThe Property Investments UK editorial team have been researching and writing about the UK's property market for more than a decade.
Before putting a property up for sale it is important to have an accurate valuation of what it is worth. In this article, we will study the expert approach and look at exactly how estate agents value properties.
When valuing properties estate agents are likely to consider a number of different factors before arriving at a valuation.
- The Specifics
- The Market
- The Valuation
There's a lot that goes into the valuation of a property. Here we will look at the specifics surrounding the property and the circumstances around the valuation, itself. In the next section, we'll look at how market conditions affect the valuation and in the final part, we'll look at the practical implications of valuations.
An estate agent will look both at the property's floor area and the number of different rooms it offers.
The number of bedrooms a property has is a crucial point to consider in a property valuation. For example, a four-bedroomed property is likely to be worth more than a three-bedroomed property even if the overall size of the property is similar.
An estate agent will consider whether the property is a detached house, semi-detached, terraced, townhouse, maisonette or bungalow etc. A detached house will generally be valued more highly than a semi-detached or terraced house of the same size.
If the property is a flat or apartment they will consider the type and size of the block it is located in and whether the flat has its own front door, garden and parking.
A valuation may take into account whether the property is an individually designed property or a property on an estate with many identical properties.
Access our selection of exclusive, high-yielding, off-market property deals and a personal consultant to guide you through your options.
"Location, location, location" is an often used saying in a property. Estate agents will consider both the local area and the individual position of the property.
Estate agents will consider the wider area, ie. what local shops, services, amenities and transport links there are and the crime rate. They will consider local school popularity and quality perhaps based on their Ofsted ratings. They might consider whether the area is wholly residential, or whether the property adjoins commercial properties.
Estate agents will consider the property’s position on the street (or in the block). They might take into account whether the location is quiet or noisy and what the outlook from the property is like.
When valuing a property an estate agent will consider its condition. They will consider whether it is in a good state of repair or a poor state of repair. They may also consider the quality of the fixtures, fittings and finish. They may consider whether the décor is contemporary and likely to appeal to buyers, or whether it is outdated and likely to be less appealing to buyers. They may consider how old the central heating system and the boiler is, and whether it needs to be replaced.
If the property is in need of renovation or repair work this may influence an estate agent’s valuation, although the valuer will not usually aim to accurately estimate the cost of any work needed.
Kitchens and Bathrooms
The condition of the kitchen and the bathrooms is something an estate agent is particularly likely to take into account when preparing a valuation.
It is often thought that modern or newly fitted kitchens and bathrooms will add to the value of a property. If the kitchen or bathrooms need to be replaced this may reduce the value of a property.
It is generally thought that ex-council or ex-social housing properties are worth less than privately built properties, even if they are otherwise identical.
If the property is an ex-council or ex-social property the estate agent may consider whether the other properties in the area are now mainly privately owned, or whether they are still social housing or council properties.
An estate agent will consider factors such as whether there is a garden and how big it is. They will also consider whether there is off-road parking and how much of it there is.
Off-road parking can add to the value of a property especially where there is restricted or no on-road parking locally.
To help them arrive at a valuation estate agents might consider what special features a property has. And whether these might make the property more or less attractive to prospective buyers. For example, does the property have original period features, is it a listed building or does it have something special like a swimming pool?
Special features may add considerably to the value of a property or they may add no value at all.
If the property has potential/space to be extended then an estate agent may take this into account in their valuation.
In some circumstances, an estate agent may consider a property’s development potential when preparing a valuation. For example, if the property sits on a large site they may consider whether it could be sold separately as a building plot.
If a property is leasehold the estate agent will look at the length of the lease remaining and what ground rent and service charges are payable when arriving at their valuation. A property which only has a short lease may be downvalued because of this.
An estate agent will consider how appealing the property is likely to be to potential buyers when assessing what it is worth. Agents will consider if it has the space and amenities buyers are looking for, or if it lacks them. They may even consider if the property has kerb appeal.
Personal Circumstances of the Vendor
An estate agent may ask about the circumstances of the seller when arriving at a valuation for sale. These won’t affect the value of the property but if the seller wishes to sell the property quickly they may recommend a lower asking price than might otherwise be the case.
Of course, there is a lot more to a valuation than the size of the property, the condition and the features of a property. The housing market, where the property is located, is also crucially important. So, before an estate agent can put forward a value, they must first evaluate local supply and demand and seek to understand the demographics of the area.
It should be noted that the majority of estate agents will focus primarily on specific locations in their career and will therefore often instinctively know what the local market it like.
This is one of the most important aspects when valuing a property for sale. Quite separately from what the property offers, an estate agent will consider what the property market is like in the area at the present time.
The estate agent may consider:
- The demand there is in the market for this type of property, at the moment.
- How many buyers are currently in the market for this type of property? This may be based on what registered buyers they have for this type of property and what enquiries they are receiving from potential buyers.
- The supply of similar properties at the moment. How many other properties of this type are on the market, if any?
- How long it is likely to take to find a buyer for the property?
Market comparables are one of the most important factors estate agents will consider when valuing a property for sale. Market comparables are one of the main ways of establishing correct market value.
The estate agent may consider:
- The asking prices of comparable properties on the market in the nearby area. (Bearing in mind that asking prices are not necessarily selling prices.)
- The actual selling prices of comparable properties recently sold in the nearby area. (Where there have been any and where this information is known.)
- Whether local and national property prices are rising, falling or staying static.
An estate agent may consider what property market data is available to them to help guide their valuation.
They may consult the UK House Price Index (UK HPI) as published by HM Land Registry.
An estate agent may also make use of automated valuation tools or desktop valuation tools to guide their valuation. Automated valuation tools combine several sources of data and use a computer algorithm to arrive at a valuation.
Receiving a valuation on a property from an estate agent is a straightforward exchange of information. However, the homeowner should still be aware of a few things such as the difference between a valuation and an appraisal and importantly, whether estate agents can be trusted to always get their numbers right.
If you are selling a property, the last thing you want to do is seel it for less money than it is worth.
Valuations and Appraisals – The Difference
It is important to realise that a valuation of a property is not always the same as an appraisal for sale. This will also usually not be the same as a mortgage valuation or a valuation for other purposes such as a divorce settlement or probate valuation.
An estate agent’s appraisal is conducted with a view to setting an appropriate asking price for the property when putting it up for sale on the open market. This may be higher than the actual market value. A valuation is or should be conducted with a view to determining what the property is actually worth. A valuation might also be conducted with a view to determining what the property is worth for mortgage purposes.
A valuation should be based on a specific set of factors. For example, RICS registered surveyors undertaking a formal valuation are required to follow the standards set down in the RICS Red Book. On the other hand, an appraisal may be based on different factors and the individual estate agent’s personal assessment. This can explain why different estate agents may suggest quite different asking prices when carrying out an appraisal.
In Scotland, the Home Report that is required by law when putting a property up for sale will incorporate a mortgage valuation.
How Much Do Estate Agents Charge for a Valuation?
Most estate agents do not charge for a valuation or appraisal if this is done with a view to putting a property up for sale. If the valuation is for some other purpose there is likely to be a charge. This might be a fixed fee or a percentage of the property’s value which could range from 1% to 5%.
How Long Do Valuations Last?
How long an estate agent’s valuation lasts will depend on if and how the property market is changing at that point in time. However, an estate agent’s valuation is normally only valid for three months.
How Accurate is a Valuation? Do Estate Agents Ever Get It Wrong?
In general, an expert valuation from an experienced estate agent with good local knowledge should be accurate. However, as property valuation is not an exact science there is always the possibility that an estate agent might get the valuation wrong. Different estate agents might also take a different approach towards valuation, which could result in different suggested valuations.
To obtain the most accurate property valuation it is advisable to ask several estate agents for a valuation and take an average of all of them.