Who does the best appraisal?

There is a difference between a valuation and an appraisal. It is defined by the qualification held by the person conducting the task, and whether their report can be relied upon in a court of law. An appraisal is the opinion of someone who is experienced and familiar enough with the local area and it often incoporates valuer methodology. It is intended to give a vendor or purchaser a reasonable idea of the likely selling price of a given property at a particular time.

Sometimes a valuer’s report and an agent’s appraisal are quite similar in terms of the resultant sale figure, or broad consensus about the number itself.

Other times, they are not at all aligned.

This may be because the agent is looking at the property with less objectivity and more bias, (unconscious or otherwise). Or it could be that the valuer isn’t nearly as familiar with the area and the recent local sales as the agent is. It could also be that the valuer has applied risk ratings that locals and agents ordinarily wouldn’t apply, such as market forces or suburb concerns. Perhaps the valuer is dismissing recent sales that haven’t settled yet, (a common occurrence), and this can lead to wide disparities between actual market value and valuer’s cited valuation when the market is moving fast. Lastly, one or the other may have missed noting all of the important comparable sales, or they may have captured anomalies that aren’t reliable data points.

When we take valuers out of the picture though, we are just circling in on those who conduct appraisals.

So who can provide an appraisal?

Anyone can. It generally requires a valuer’s methodology, (or part thereof) and can range from comparable sales analysis, to calculating land and improvements. Sometimes it requires rigorous reverse-calculations, where capital growth rates are overlaid on historical sales of comparable properties. The difficulty-level increases when the property scarcity is higher, or when recent sales volumes for similar properties are low.

The individuals who are most likely to conduct appraisal activity are buyers, (the analytical ones), Buyers Agents and Selling Agents.

So who, out of these three, conduct the best appraisals?

The analytical buyer has a tight focus. While they may not be privy to the sales across every budget, they will be very familiar with the sales within their budget. They won’t have just walked through each property.. they’ll have potentially visited some on multiple occasions and they may have even conducted building inspections on them. The advantage that this contingent also have is that they’ll be familiar with the competitive conditions associated with the sale result. For example, they will know when two Dads have gone head to head and pushed $200,000 past reserve, or when a disagreeable tenant has made the agent’s campaign difficult, hence enabling someone to buy at a bargain price when everyone else had insufficient opportunity to inspect or conduct due diligence. They will know when a living area felt too dark, or when the express train was too noisy. Their insights into a particular property will often be sharper than a real estate professional’s, however their breadth of knowledge across other price points and dwelling types will likely be quite limited.

A Buyers Agent has an edge on many Selling Agents in terms of their exposure to recent sales. Unlike Selling Agents, who often don’t get all of the exposure to every property competing with their sale property, Buyers Agents will likely have been exposed to all of the competing properties for a given dwelling type in a given area when they have an active client brief for that particular product.

Buyers Agents will explore every potentially-suitable property for their brief, and with a vast range of agencies.

While some Selling Agents will politely say hello to an opposition agent and wander through their open-home to compare it with their own listing, many don’t practise this type of activity. This could be due to an awkwardness they’d prefer to avoid, or a time-constraint, (understandable because agents usually have their own open-homes when other open-homes are scheduled).

Sometimes I’ll field calls from Selling Agents who ask me how a particular dwelling compares to their listed property. I’m certain that they ask active buyers similar questions when they greet them at the door too.

It’s not just about trying to sell a listing. Selling Agents engage with buyers to ‘talk’ property for many reasons, including strengthening their local intel on current listings.

Like Buyers Agents, Selling Agents also have great sensory perception when it comes to detecting a rising, falling, stable or turning market.

When it comes to appraising, Selling Agents have an edge that Buyer’s Agents don’t quite have. They are familiar with the competing buyers. They know who has missed out, what they missed out on, what else is coming up, who else could be interested in it, and most importantly, they know what a broader array of buyers would be prepared to pay for a given type of property. They also have a broader sense of what their cross-section of buyers feel about one particular property in terms of attributes, details and eccentricities.

Buyers Agents study one buyer at a time, for a given dwelling type in a particular location. They aren’t privy to the needs and wants of all four bidders at an auction.

As pointed out by yesterday’s auctioneer, they don’t only rely on recent comparable sales and market movement statistics. They have an ear to the ground at any given time for those buyers who would be keen on a specific dwelling type in their suburb, and they have a reasonably accurate idea of what those buyers would be prepared to pay. Especially in a moving market, recent comparable sales can’t always indicate today’s price. Overlaying capital growth rates is one thing, but knowing which buyers would pay a certain price tag right now is another thing.

They’ve seen underbidder budgets, bidding limits and failed offers. They’ve walked certain buyers through off-markets, and they’ve fielded multiple offers when private sales, expressions of interest campaigns and passed-in auctions have ensued.

When it comes to any particular snapshot in time, they’ve seen a lot.

The short answer to the question; “Who does the best appraisal?” is easy.

When we collaborate, ask questions and consider reaching out to others, we can glean the best information and collate a very accurate appraisal.