oc | Sunday 26th January

Whose Opinion Counts Most In Deciding the Worth of a Property?

With Super Saturday done and dusted, and the primary focus of the real estate industry now on which of Bart’s ponies has the best chance in the Cup, we can return to our series on worth, price and values.

A fortnight ago we talked about how a home’s worth can mean different things to different people. The definition of worth I most liked was: “an indefinite quantity of something having a specified ”, which practically speaking means that a home’s is made up of three components: + building + emotion.

Because individual calculations of land + building + emotion to arrive at an opinion of value are not exact sciences, it is worth looking at whose opinions and formulas really, truly, count when it comes to deciding a home’s value.your

For instance, if you are a homebuyer competing against a developer you will both have different emotional components when it comes to a and you will place different values on them.

For the developer the land may be worth more a lot more than it is to you.  For you though the building may be worth a lot less to the developer than to you, given that the developer will bulldoze while you may renovate. As such you may have very different opinions on components of value – even if by some chance you arrive at a similar number using very different calculations.

Opinions on how to calculate land and building and emotion are a bit like people’s favourite vegetable soup recipe. Using roughly the same ingredients, but in different doses, you may end up with quite different end results.

However, while there may be no single one correct valuation recipe, we think that there are three sources of opinion for this valuation recipe that need to be taken account of in the homebuying process.

But first – we’ll look at those whose opinions don’t count as much as you might think. They include your great-uncle Jerry, or Johnny at the bar, or your mate at the footy whose opinions are so often clouded with uninformed emotion that they are more useful letting us know the Melbourne Cup winner than the value of a property you have your eye on.

The opinion of bankers, and of the divorce lawyer’s expert valuer may occasionally be important – but they are not in our Top 3.

It may be bordering on blasphemous to say, but we think buying and selling agents’ opinions on value aren’t in the Top 3 either. Buying and selling agents are a lot of things and the professional ones are very skilful at guiding your opinion. But in the end what agents do is provide a framework and drive the process rather than act as true arbiters of value.

So whose opinion does count?

Well, firstly there’s the seller of the property. Because no matter how high, how unreasonable, or how completely distant from the norm their idea is of what their property is worth, the seller’s opinion has to be taken into account for a transaction to take place, even if in the end it might need to be adjusted to the demands of a well-informed market place.

The second important opinion is that of the highest other bidder. He or she is often your true competition and if you are to be the buyer then you need to have a better opinion or valuation recipe than the other highest other bidder in order to impress the judge (seller).

And the third and final opinion that really counts? Well, that is yours – whether it is a singular or a joint opinion between you and your spouse and family.

What you think a property is worth, your recipe for land + building + emotion, is in the end the most important of all. If it matches the seller’s opinion or even a bit more,  so be it. If your opinion is informed and feels good, then it is right. And we think you should place it above all others.

Printed each week in The – Melbourne’s Million Dollar Plus Magazine

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