Getting a free Market Estimate, not a paid valuation.

Obtaining a market estimate on your rental investment property is not the same thing as having an independent valuation done.

An estimate is usually done by a real estate salesperson, who comes through your property and assesses it based on what they think they can sell it for in the current market.

While this can be a good way of getting a rough idea of the value of your property, you must always remember that a realtor wants to sell your property for you (even when you tell them that you aren't ready to put it on the market just yet). Prices can become artificially inflated by $10,000-20,000 at the bottom end of the market, up to $50,000 or more at the top.

What should you do to get a reasonable market estimate?

  • Have a look online first to see what similar dwellings are on the market for in your area,
  • Also try to find sites that list properties that have recently sold (with their values, which are sometimes withheld by the buyers or vendors).
  • Call three realtors and get them to do market appraisals for you.
  • Take an average of all of these numbers and see what you get. This will be closest to the real valuation.
  • Use this opportunity to pick the agents' brains for what changes will improve the property's value in the area. Agents have a finger on the pulse of what people are looking for, and can probably give you a simple appraisal of what value would be added by making the improvements.

Remember that a market estimate is more useful when you are considering selling your property than it is to the bank when you are purchasing or refinancing. For either of these, a full, paid independent valuation should be done by a licensed property valuer.

Agents are only licensed to sell your property and have a rough guess at the price they can sell property for in your area.

A market estimate (average of three or more figures) can become useful as a valuation tool with lenders, only when there is a dispute over the bank's own valuation.

If you can take good examples to a bank (with pictures of equivalent recent sales - not listings - in your area), you may be able to sway them in your favour from an undervaluation. I say may, because it is very difficult to sway a bank valuer's opinion, especially if they are using the valuation as an excuse not to lend to you!

If all else fails, you can opt to have an independent valuer come in and dispute the bank's valuation.

Better yet, see if you can find out the name (through another source) of a valuer who sits on the panel for the lender you plan to borrow through. Just don't tell them that you're borrowing through their bank.

A bank cannot argue with a valuation certificate from one of their own panel!

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Just remember, we're not financial advisers, so you should use the information we give here as a guide only (in relation to your personal circumstances) and see an accountant or financial adviser before proceeding further.

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