The fact that one’s home is one’s castle does not make it that in the market place. So how do you establish the real value of your property?
The fact that one’s home is one’s castle does not make it that in the market place. So how do you establish the real value of your property?
Every four years, municipalities throughout the country go through the process of revaluing properties and updating the Valuation Roll. The higher the municipal valuation of one’s property, the higher the rates payable.
Along with other factors, the municipal valuation takes into account recent sale prices realised by properties in the area. While it therefore serves as an index to the market value of similar properties in the same town, suburb or street, the municipal valuation has no predictive bearing on the market value of a particular property.
And while home-owners are generally happy to have the value of their home underestimated for municipal and insurance purposes, it is a different matter entirely when it comes to its market value, which is ultimately determined by agreement between what the purchaser is willing to pay for it and what the seller is willing to accept.
In addition to the municipal and market valuations of one’s property, there is the insurance valuation. As an estimate of the building’s replacement cost in the event of its being destroyed or damaged beyond repair by a disaster other than what the insurance industry defines as an “act of God”, it includes not only the cost of rebuilding and refitting the property from scratch, but the cost of removing the rubble of the original building.
What determines the premium payable, however, is not the insurance valuation as such, but the insured value, which is determined by the owner as the value s/he chooses to insure the property for.
If the insured value is below the insurance company’s valuation, the owner will pay a lower premium, but risks being covered only in part in the event of a claim.
In the case of market and insurance valuations, the quality and cost of one’s bathroom fittings can be expected to make a difference.
But such details have no bearing on the municipal valuation, in which the location of the property will be more definitive of its value than whether the bathroom floors are covered in worn lino or tiled with imported Italian marble.
Estate agents’ similar emphasis on “location, location, location” as definitive of market value would, in turn, have no bearing on the insurance valuation of a property.
A house that sits on the market forever because the asking price is unrealistic has no value.
Attaching a realistic market value to one’s home requires seeing it through others’ eyes. Since they know what buyers’ eyes look for, estate agents’ assessment of a property’s market value tends to be more accurate than the owner’s.
