When we put our homes on the market we expect to see buyers loving it as much as we do. But the truth is that, to many of them, your property may be nothing special at all – or not worth their money.
Buying a home is a personal experience so buyers can be influenced by many different factors, says Jonathan Davies of Tyson Properties.
“For some it’s simply the price. Does the price reflect what the home has to offer or, simply put, does the buyer see 100% of the value?
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“Take, say, a property with a tennis court. The avid tennis player will see the value. But someone who does not care for tennis will not appreciate the value, so there might not be a sale.”
Property values can often be a contentious issue, not only insofar as rates are calculated but also the price a home sells for, or what a buyer may be prepared to pay. There can also be differences in the value assigned to a property by the local municipality and the value given by an estate agent.
Erwin Rode, managing director of Rode & Associates, says in terms of the Municipal Property Rates Act, the municipal value of a property must reflect the market value. However, as these are mass valuations, one would “not expect an accurate estimate at all times”.
Residential estate agents arrive at their property valuations by gut feel – which he says could result in quite accurate value estimates if they have been specialising in a particular area – or they use comparable sales as a guide.
“Often, they use a combination of the two.”
Factors that increase or decrease value
For residential property the most important drivers of value are location, floor-area size, quality or age of the building & finishes, and condition of the building, Rode says. Negative factors are noise – such as being on a busy road or under the flight path of an airport.
“Location would include crime and proximity to work opportunities. In low-cost areas, one presumes proximity to reliable public transport is also a factor. When using the comparable-sales method, it is, of course, crucial to use sales that are truly comparable.”
David Jacobs, Gauteng regional sales manager for the Rawson Property Group, says the neighbourhood makes a “huge difference” to the value and growth prospects of a property investment. Proximity to schools and amenities, public transport routes, hospitals, and police stations are also taken into consideration.
“This is usually incorporated when an agent does a comparative market analysis”
Factors that can drive down a property’s value include the quality of the property’s infrastructure – such as if it is old and unmaintained and needs a lot of work, or being situated in a notorious neighbourhood, an inconvenient location, a remote or crime-filled area, or even on a busy road with constant traffic noise.
“One thing modern buyers are unwilling to compromise on is security. If there is no basic security or the security system is not updated then that can also contribute to lessening the property value.”
The factors that contribute the most to a property’s value though, says Kgomotso Sebakwane, head of analytics and valuations at FNB private bank lending, is the amount of living space available.
“Different people value different things, however having the option of having an extra bedroom will always add more value. Beyond just the purely functional aspects of a home, the quality of finishes adds the extra appeal to a property.”
Any major structural or cosmetic defects, however, detract from the value of a property.
“Whether it’s a crack in the wall, rising damp or peeling paint. The potential home buyer lands up staring at a potential problem that they need to fix. Whatever the quoted cost of repair, the potential home builder will always subtract more from the value of a property based on the uncertainty of even more repairs. People tend to double discount when they see anything wrong.”
Jacobs says estate agents arrive at their valuations via various ways, the most important of which are:
- Size of the property
- The property’s fixtures and finishes
- The property’s location – proximity to schools and amenities, public transport routes, hospitals and police station
- Comparative market analysis
“Real estate agents’ values are determined by a physical viewing of the property and the understanding of the property’s offering combined with a comparative market analysis, whereas a municipal valuation is not based on a viewing, but on a standard number of square meterage and does not include quality furnishing and fittings.”
He says that, more often than not, the real estate valuation is “slightly higher”, as it takes into account more of the property’s characteristics than the municipal valuation.
Knowing how much your home is worth is not only useful before selling, but also during your time of home ownership. If you know the value of your property, and understand the factors that affect that value, then you will also know how to safeguard against negative influences that will cause your home to depreciate, says regional director and chief executive of RE/MAX of Southern Africa, Adrian Goslett.
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