Sellers should be aware of the fact that the municipal valuation of their home may not be a true reflection of its value.
We recently received a call from a very irate vendor who had made up his mind to sell privately because, he said, every single estate agent he had dealt with had valued his home at far less than it was worth. He believed they had done this because ‘times are tough and the agents want a quick sale’.
On investigation it was found that he'd approached four different agents from four separate agencies. All had supplied him with a comparative market analysis (CMA) which clearly showed the average selling price in his particular area, as well as a list of homes which had been sold in the last three months. The estimated value of the home as calculated by all four agents didn't vary much and it was recommended that the seller put the property on the market for between R900 000 and R950 000.
On further investigation we established that the home was a three bedroom, two bathroom property with a swimming pool, situated in a fairly good area. It was an older home which according to the seller needed a little cosmetic work. Although we obviously couldn't do an actual valuation, the agents’ reports were consistent and it was clearly evident how they had calculated the selling price. We then asked the seller what made him think his home was worth more and had a lightbulb moment when he pointed out that his local municipality had valued his home at R1.3-million.
“This happens all the time,” says Mrs Van der Merwe, principal ABC Estates. “Some sellers, particularly those who haven't bought or sold property fairly regularly and who have lived in the same house for years assume the municipal valuation is a true reflection of what the home is actually worth. When they hear otherwise they automatically believe that the agent is trying to pull a fast one by marketing the home at a much lower price. And unfortunately, the bigger the discrepancy between the municipal valuation and what an agent believes the property will fetch, the harder it becomes to convince a seller what their home is actually worth under current market conditions.”
She notes that even buyers who understand that the municipal figure may be inflated often struggle to grasp the idea that a buyer simply won't be willing to pay that amount, particularly, it seems, when the agent’s valuation is below R1-million.
“Many sellers look at the R1-million price mark as a sort of magic number and are devastated when they learn that the more realistic selling figure is actually R100 000 or R200 000 below the municipal valuation.
“Every seller needs to remember that a selling price is determined by a number of factors which include the area in which the home is situated, overall market conditions as well as the condition of the property. Unlike a municipal valuation, estate agents don't only base their findings on the size of the property on which the house is situated and the size of the home, they take things much further by inspecting the actual property (inside and out) before determining a realistic selling price.”
It needs to be remembered that it's in municipalities’ best interest to over value properties because this will mean the owner pays higher rates. Unfortunately, homeowners who dispute the figure determined by the municipality and who manage to get the authorities to drop their estimate often find that the amended sum still remains higher than the true market value of the property.
Serious sellers understand that price is everything and even if they are selling privately will consider all the various factors before settling on a price.