Buying your first (or next) home is a big undertaking. It means scrolling through property listings, dedicating your Saturday mornings to open homes and spending hours getting your paperwork sorted for pre-approval.
So, you want to ensure you’re spending your time wisely and only researching properties that align with your budget. To do just that, you’ll need to have a good handle on the current market and what you’re likely to pay for a particular property.
Sounds simple enough, right? Unfortunately, understanding the market value of a property is one of the biggest challenges for buyers (particularly in a competitive market). To help you save valuable time and energy, we’ve pulled together your go-to guide for estimating property values using TheOneSpot’s new price comparison tool.
Why can it be difficult to estimate property values as a buyer?
As a buyer, you want to do everything you can to boost your chances of making a successful property purchase. However, when the market is moving fast and competition is high, it can be hard to understand the true value of properties up for sale.
Property prices shift based on supply (how many properties are available) and demand (how many buyers are trying to purchase). If there are more buyers than properties available, prices will likely climb as competition increases. If there are more properties than buyers, prices are more likely to drop as sellers try to attract buyers to make a sale.
As of April 2021, properties are being snapped up by buyers at record speeds across Australia. The number of days properties are spending on the market is decreasing, down 2.7% to just 26 days across capital cities. This means we’re in a sellers market where buyers are having to act fast to secure a property they have their eyes on.
As a result, property prices are rising rapidly. In 2021, the latest CoreLogic data reveals property values across Australia have increased by an incredible 7.2% so far this year.
With such significant changes happening every month, it can be difficult to accurately predict property values in the current market. That’s why many experts recommend buyers use recent sales of comparable properties to get a better sense of the market value of a property.
The difference between listing prices and market value
Have you ever seen a property that has sold for significantly more than the advertised price?
Here’s the thing: there’s a difference between the listing price and the market value of a property. The advertised listing price is how much a seller hopes to sell their property for, usually based on a formal property valuation.
Sellers will often engage a professional valuer to understand their property’s potential selling price. Plus, a valuation can help to identify any improvements they can make prior to selling to boost the value of their property. During this process a valuer will typically use a direct comparison approach to compare this property to recent sales of similar properties in the area. They’ll also factor in things like location, the number of rooms, land size, zoning restrictions and more.
On the flip side, the market value of a property is based on how much a buyer is willing to pay. This figure is determined during a negotiation with the seller (whether that’s at auction or by a private treaty sale), and can be higher than the valuation price if the buyer’s emotions, motivators or market knowledge influence their decision making.
Generally, the ‘hotter’ or more competitive the market is, the more likely buyers are to offer more than the listing price in the hopes of securing the property.
Why is reviewing recent property sales important as a buyer?
With all of this in mind, how can you get an accurate picture of a property’s market value? That’s where comparing recent property sales comes in. By taking the time to review the sales results of comparable properties in the area, you’ll be in the best position to accurately estimate a property’s market value.
Reviewing past sales shows the market value of particular properties, which can help you make an educated estimate of how much similar properties will sell for in the same market conditions.
There are plenty of reasons why it’s useful to review recent property sales data as a buyer:
– It helps you set realistic expectations about what you can afford: there’s no point wasting time attending open homes for properties that are well beyond your reach. By gathering an accurate picture of a property’s value, you’ll save time, narrow your research and consolidate your efforts towards just the kind of properties you can afford.
– It takes overwhelm and disappointment out of the buying process: there’s nothing worse than getting your hopes up about a property that has been significantly undervalued and listed well below market value. So, doing your own research and comparing recent sales prices will give you a more accurate gauge of what each property is actually worth.
– It puts you in a stronger negotiating position with the seller: by doing your research and understanding current market conditions, you’ll be able to make competitive offers and justify the price you’re putting forward to the seller.
Your step-by-step guide to comparing recent property sales
Now, let’s look at how you can compare recent sales to get an accurate picture of what a property’s market value might be. We introduced a feature to our app that allows buyers (like you) to easily compare recent sales data in just a few taps.
Step two: evaluate the property value and price prediction
Head to your property Shortlist, and tap Evaluate under your chosen property. Tap the Value tab to discover the price estimate of what this property is predicted to be worth.
Want to see how this property compares to recent sales in the area? Hit Show comparables to scan for recent sales in seconds and discover the likely market value of this property.
From here, you can navigate a map of recent sales in the area and view what price they sold for and when.
Step three: compare this property against recent sales in the area
So, there you have it. When it comes to buying a property, having an accurate understanding of property prices is key to streamline your property search. By taking advantage of tech-driven tools, such as our price comparison feature, you can cut down the time it takes to estimate property values and focus your efforts on property within your reach.
The sooner you find properties aligned with your budget, the sooner you’ll be able to successfully score the keys to your first (or next) property.
To create a more accurate estimate of this property’s market value, simply add three or more recent sales that are comparable in size and location to this property.
The key here is to look for recent sales that have a similar number of bedrooms, bathrooms and location to the current listing you’re researching.
With this data on hand, you’ll now have a more accurate price range for this property based on recent sales. This is extremely valuable as this price range is based on real market value, not simply on the listed price.
The LandingPad app also gives you the opportunity to easily view each comparable property in greater detail. Our comparison tool shows exactly how similar this property is to the listing on your Shortlist, and what details are different, such as whether it has more floor space or an extra bedroom.
With all this information at hand you’re ready to really understand market value, so you can be confident when it’s time to make an offer.