Buying and selling real estate is no different to any other product. It relates directly to basic school level economics; supply and demand. There tends to be 3 price levels in the market, and whether you are the seller, buyer or a third party (real estate agent, valuer, bank etc) will determine where you see value. There is no right or wrong answer, it is just a case of a difference of opinion in terms of where value sits.
If these three levels are investigated you end up with:
Rateable value – A perceived value based on a computer analysis of a predetermined value (as in, it does not take into account any difference in the quality of improvements) on the area of the dwelling and property – no one will actually visit the property, and the value has been known to be up to 50% different (up or down) from what the property has sold for.
Registered valuation – A trained and skilled professional with years of experience utilises local knowledge and substantial records of sales to establish a value that can be either a replacement based value, (meaning they will calculate a cost of what it will take to replace the house if it burned down), or a value worked out to the best of their knowledge based on recent sales in the area of what the property/land should sell for.
Market value – What a willing buyer is prepared to pay for the property; it is that simple!
A key difference between the market value and the registered value is that a registered valuer is trying to establish what someone ‘should’ pay. It is a mathematical calculation; there is no emotion. Registered valuers have a challenging but important job, as they provide an unbiased, non emotional, and factual report to the market.
The market price can only be established by the buyers in the market and this can change quickly. Unless you have a cheque book out, ready to purchase a particular property, the value in your head is just an opinion.
Rateable Value – What you can pay
Registered Value – What you should pay
Market Price – What you end up paying.