Some asking prices are fair, others are outrageous.
Some asking prices are fair, others are outrageous. Here are some ways to help buyers determine which are which.
Local Council Websites
Most local councils have rating information for houses on their websites. Just go to their home pages and click on “Rates and Property Information.” Search by the address and it will provide you with the capital value (CV) of the property. This is the probable price that would have been paid, including land and buildings, for the property if it had been sold at the date the valuation was conducted.
The CV is not a full market valuation, it is an estimate calculated on behalf of the local council to assess rates payable, however it is a good way to get a ballpark figure for the value of a property – and it’s free. Check the date the CV was conducted and factor in whether prices have been rising or falling since then and remember that the CV does not include chattels e.g. carpets, curtains, light fittings, TV ariel, dishwasher, etc, so make an additional allowance for what is being sold with the home.
Summary: A great free starting point.
QV E-Valuer Reports
These are computer-generated valuations available from www.qv.co.nz They cost around $40 each and provide an estimate of the current market value of a property, based upon the sales prices achieved by similar homes in the same area in recent weeks and months. The E-Valuer report also lists the addresses and photos of up to 10 comparative local sales, showing their land area, building size, CVs and sales prices. It will also show what price the current owner paid for the property.
Using the E-Valuer you can see whether buyers in the area are typically paying above or below CV levels. Do a drive-by of these comparative properties; are they in better or worse condition than the home that you are interested in, do they have more land or a better or worse aspect? Take all of these factors into account.
Summary: Not free but not expensive; highly recommended for comparative sales and general information about a property.
REINZ Data
If the home is being marketed by a real estate agent they should have access to Real Estate Institute of New Zealand data for local sales. This covers recorded sales (and original listing prices) for the last five years and can be sorted by street, neighbourhood, title, price level and agreement date.
Ask the agent to provide you with a report sorted by agreement date, showing sales over the last 12 or 18 months for the street in question as well as other nearby or adjoining streets. You will quickly see if the asking price is in kilter with recent comparable sales in the area.
Summary: Very useful and up-to-date price information; only available via agents.
Full Market Valuation
The best possible way to assess the value of a property is to pay for a Full Market Valuation by a professionally qualified valuer. This involves them visiting the property and conducting a detailed examination of the home. They then produce a report which takes into account their observations about the condition of the property as well as comparative local sales in order to come up with their estimate of value.
These reports usually cost from $475 for a 3-bedroom Auckland home, although they can cost considerably more depending on size and location. Home buyers often commission these reports at the insistence of their lenders who want firm evidence of market value to support loan applications. However, more and more banks are waiving the need for full market valuations as automated valuation technology becomes increasingly reliable.
Summary: Very useful, but can work out expensive if you buy one of these for every home you are potentially interested in.
Whatever you do as a home buyer, do not automatically assume that the asking price is reasonable.
Sellers will often initially put their property on the market at a ludicrous price – and against the advice of their agent – on the off-chance that a cashed-up migrant with more money than sense might walk through the door at the first open home.
Remember, whichever party has the most information will fare best in negotiations. If a seller is asking $800,000 and you can prove that two bigger, better homes down the road sold for only $725,000 at the peak of the boom in late 2007, then it will be hard for them to stick doggedly to their asking price. On the other hand, if you can see from the comparative sales that similar houses in the area in the last 12 months has been for over $900,000, then you might just want to keep that to yourself and take their arm off.
