Before beginning negotiations, it is important to understand as much as possible about the value of the property. A valuation for an identified property this should be obtained to help ensure that any offers submitted reflect its true, current market value. The costs for the valuation can be recovered many times over by reducing the risk of paying too high a price for a property.
The term valuation is applied only to a valuation from a licensed valuer. All other estimations of the value of a property are called ‘appraisals’. Real estate agents who are not licensed valuers undertake appraisals when submitting proposals for agency agreements with vendors.
There has been much discussion in the press about the unethical nature of a minority of agents who put too high a sale value on properties to gain the business of vendors. The Real Estate Institute of Australia has worked with state governments to develop appraisal standards that reduce the incidence of these unethical practices.
There are several ways to arrive at a fair market value for a property, which are discussed in the next topics.