For a buyer to truly understand whether or not they are getting the best home for their money, they need to understand the factors that contribute to a property’s worth, bearing in mind that there is more to the value of property than the price that the buyer paid for it.
Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, points out that there several other factors that contribute to a home’s value, which a buyer should consider before they make the purchase. These include aspects such as the property’s location as well as the micro market surrounding the particular sale transaction. Carefully researching these elements will help the homebuyer in selecting the right property and achieving good returns on their investment over long term.
“If a potential buyer has done their research and has a fairly good understanding of the numerous details that are involved in a property sale, as well as knowing the their own financial and personal requirements, they will have a much better chance of finding a property that offers good value for money,” says Goslett.
He adds that determining the price bracket, the type of property and criteria that the property must have before starting the search, will make the process of finding the right home far easier. “Once the buyer has an idea of what they are looking for, a real estate professional will be able to assist them in fine tuning their search and narrowing down potential options. A real estate agent who specialises in the area in which the buyer wishes to purchase will be able to provide valuable information about that particular area. Often agents will have access to past sales figures and data that will help the buyer make an informed choice. They will also be able to guide the buyer with regards to the current conditions that surround the market in that area and whether or not the home is a worthwhile purchase based on its asking price, perceived market value and the cost,” says Goslett.
He provides potential buyers with a few considerations when looking for a good value-for-money property:
The price is right
The asking price of a home is regarded as the property’s worth in the current market. Goslett says that all too often sellers inflate their asking price due to their emotional attachment to the home. As a result the price that the home is on the market for is not always the true market value of the property. He notes that it is for this reason that buyers should have a broader understanding of the market in the area and compare selling prices of other properties which offer similar features. This will help the buyers to assess whether or not the asking price is within a fair range of market value for the area.
Evaluating true value
The current market conditions are one of the major influences when looking at the value of a property. In a boom phase of the market, property values are perceived to be far greater. Conversely, during a slump in the market homes generally sell for less. In the years that have followed the international downturn, property values have increased. “In fact, there are areas where property prices are higher than what they were during the height of the boom in 2007. This reiterates that fact that property is best viewed as a long term investment,” says Goslett.
“Demand also has a huge impact on the perceived value of property and pricing. With the current market experiencing inventory shortages, demand has strengthened as fewer properties mean more competition among buyers. Essentially, a property’s value is largely determined by the buyer in the market, not the seller. The more that buyers are willing to pay for a property, the higher the property’s value will be.”
Factors that influence how much buyers are willing to pay for a property vary due to personal choice and lifestyle. Certain buyers might pay more for a property if it fits into their lifestyle needs, such as proximity to a particular school, their workplace or public transport. What determines value for one buyer may not be the same for another.
Don’t forget cost
Goslett says that homeowners often think that they will be able to make back a large portion of the cost spent on renovating and improving the property and therefore price it accordingly when they put it on the market. But, while there is a certain element of truth to that, it depends heavily on the renovation or upgrade. “How the renovation impacts the value of the property is also largely based on how they are perceived by potential buyers. Often renovation projects are based on the current homeowner’s personal preference or criteria. If the buyer has different needs or preferences, the renovation will have far less value to them,” says Goslett.
Although having a real estate agent provide a comparative market analysis is an excellent staring pointing in determining whether a property is a worthwhile purchase, a property’s true value will largely be subjective. “The buyer is the only one who will truly know what a home is worth to them. At the end of the day, a home is more than an investment – is a place to live,” Goslett concludes.
