When the time comes to sell your property, an accurate appraisal is essential. Naturally, a reliable property valuation tells you what you can expect to earn from your sale, but you’ll also have an idea of what you can afford for your next property, and what you should expect to pay in taxes. These factors are indispensable regardless of whether you’re a property developer, property flipper, homebuyer, or otherwise. The only questions left are how you can appraise your property and what the property valuation fees are.

In this article, we will answer these questions, break down how property valuation works, and cover why property valuation is so important.

What is a property valuation?

Property valuation is the process through which the value of a property is assessed. An assessment is usually done to inform the seller of what they can expect to earn, or to give an idea of what their budget will be for another purchase. Property valuation is also commonly used by property developers looking to secure a loan against one of their properties. For example, property developers looking to obtain a bridging loan will first get their property valued before applying for finance. For this reason, property valuations must be conducted by a professional in order to be accepted as a genuine estimate.

Why bother with property valuation?

It may be tempting to forgo an official property valuation, instead making a rough estimate yourself and seeing how the market reacts. While this might work in some cases, it’s almost always best to get an official property valuation first, especially if you want to obtain any loans. The first and most obvious reason is to give you a firm idea of what your property is worth; a proper appraisal will make sure you don’t sell your property at a lower value, after all. You’ll also have an easier time planning your investments, as a property valuation will give you an idea of its future potential as well.

Property valuations are also vital parts of securing finance. All secured loan lenders, whether it be a mortgage, bridging loan, or otherwise, will want to see a professional appraisal of any proposed collateral. This appraisal will be used to gauge how much money they’d be willing to lend you, and will be factored in when considering the Loan-to-Value (LTV) ratio. Essentially, this ratio is the percentage value of the loan based on the value of the property, with the remainder being the borrower’s responsibility. For most lenders, the maximum LTV is 80%, though there are some who are willing to lend in excess of this percentage. Without a property valuation, your chances of obtaining such a loan are nil.

How is a property’s value determined?

Property valuation is a fairly complex task that considers a range of different factors, plus a touch of subjectivity. While any professional property valuer will aim for pinpoint accuracy in their valuation, there is no objective value to be reached. As such, you should consider valuations to be a ballpark figure, and you may want to consider a second opinion.

Despite an element of subjectivity, property valuers do have specific factors in mind when valuing a property. Generally, property valuers are mostly concerned with a property’s internal characteristics, such as structural integrity, utilities, furniture, number of rooms, quality of decor, and overall square footage. These factors are typically given the most weight, as they directly contribute to habitability and the overall quality of a property.

The plot that the property is situated on is the next main consideration. This includes the amount of land, external appearance, the presence of a garden or driveway, whether the garden is overgrown or well-maintained, and so on. A modest but well-kept exterior can contribute notably to a property’s overall value.

The last main consideration in a property’s valuation is the location. A property’s neighbourhood is a key contributor to a property’s value, and can be make-or-break for many buyers. This being the case, property valuers will consider factors such as nearby amenities, such as schools, shops, or hospitals, crime rates, ease of transport, both public and private, and even neighbours. Well-situated properties will be much more valuable than those in an inconvenient area.

How you can appraise your property

Property appraisal can be done in several ways, though each has the same objective of ensuring a property’s value is properly assessed. Each method aims to compare the value of the property to another factor, giving the seller information relevant to their goals. For example, an appraisal for an investor will take into account the cost of replacing a property in its entirety. In doing so, investors can get a more reliable, up-to-date estimate of a property’s value, allowing for more prudent investment choices.

Alternatively, a property valuation can be conducted using an income approach. Rather than give a cash estimate of a property’s value, an income approach estimates a property’s revenue as a rental or investment property. Revenue is estimated in part using its property value, but also the cost of maintenance, average rental price, and market availability. Regardless of the method you use to value your property, you must use a professional valuer for the appraisal to hold any water. 

How expensive are property valuation fees?

Property valuation fees depend on a variety of factors, and the category of the property in question. Residential properties, for example, are usually much cheaper to value than industrial or commercial properties. In addition to the property’s categorisation, the valuation fee will be influenced by hourly rates charged by the valuer, any additional fees they may charge, and the property’s value. Most valuers charge based on a percentage of the property’s value, meaning a high-value property will cost you a fair bit more than a low-value one.

Ultimately, the cost of a property valuation hinges on the property valuer you use. Some have a slate of fees they’ll charge, while others forgo additional fees in favour of other methods of pricing. This makes property valuation fees vary wildly depending on the valuer and circumstance, with an average cost of around £380 to £800. Depending on your situation and chosen valuer, your valuation may end up being outside this price range.

Wrapping up

Despite the cost, property valuations are typically worthwhile. They can help property investors spot hidden flaws that would hurt profitability, and help homebuyers catch any repair work in the making, possibly resulting in a cheaper price. Likewise, property valuation can help sellers put their property on the market for what it’s worth, and obtain finance for purchasing their next property. However, it can be difficult to know where to start when seeking a property valuation for the first time. If you are unsure of your next steps, consider getting in touch with a professional to help guide you through the process.