Which value do you mean?
This is a guest post from Rebekah Hurworth, CEO & Founder of Family Home Experts
Understanding the four ‘values’ placed on your home.
I do a lot of work with families who know they need to do something with their house, but are unsure to what degree they need to make a change. Perhaps you’re in this same position, or you may already have a clear idea on whether you should sell, renovate or build…however the value of your existing house should be the core piece of information at the start of any discussion or analysis to know you are making the right decision.
But which “value” are we talking about? There are four different types of value:
- Personal Value
- Resale Value
- Rental Value
- Bank Value
Personal value is your own attachment to the home. There was an emotional reason you purchased this specific property and more often than not you will see value in particular aspects of the property which you believe give it its point of difference. When you do have a personal attachment it can be hard to face the reality that not everybody will value these aspects the same way, to a real estate agent or a bank, it is just another house.
Resale value is what your property is worth in the current sale market. Until your house is sold, this isn’t a fixed number. It is important to understand the flexibility of this number, and to be realistic rather than optimistic. A good real estate agent can give you a list of recent sales in your area to use for comparison which will generate a suggested price range which your house should fall into.
Rental value is the return in rent you would get if, instead of selling your house, you kept it and rented it out. This can be a useful figure for comparison to the resale figure, and a good financial planner or accountant can show you how these two different numbers impact your financial situation and in turn help determine whether or not you should sell.
Bank value is the banks opinion of what your house is worth, and is used to help the bank decide if they will lend you money. Mainly, the bank is concerned that if they do lend you money and you default on your payments, is the property worth enough for them to recoup their money? And they would recoup it by selling it normally. So it’s all about risk here. This means the bank isn’t interested in the “best resale value” but a worst case resale value, often they have a ‘fire sale’ attitude. I know of a house that was valued for resale at $2.4 million but the bank valuation was only $1.2 million, despite arguing and producing recent sale evidence.
Each valuation is important to consider when you begin to look at the changes to be made with your house. Accepting that the personal value you place on your home may not align with how a real estate agent and bank will place resale, rental and bank values on the home is the first step to the decisions you will need to make about how your home will evolve. At the end of the day, it comes back to your attitude to these figures to ensure the time and effort spent making any changes are the most suitable for your situation.
Rebekah Hurworth RAIA
CEO & Founder
FAMILY HOME EXPERTS
Rebekah Hurworth is CEO and founder of Family Home Experts, a Brisbane based business specialising in housing across Australia. Founded in 2008, Rebekah is a level one member of the Australian Institute of Architects and her business an ‘A+ Practice’ with RAIA. In 2015 Rebekah was awarded a Gold Stevie Award in New York for business entrepreneurship. Rebekah has pioneered a new way of looking at property and teaches this in a three hour workshop called ‘Buy Like An Architect’ and a weekend Masterclass. Rebekah is also a regular keynote speaker on topics such as property strategy, networking and how to successfully work with designers and architects. Rebekah has two degrees in architecture from QUT and three businesses. Rebekah has been featured in Queensland Homes, Brisbane News, Family Capers, NAB, Commonwealth Bank, Mortgage Choice and Aussie Home Loans.