Exploring the intricacies of accurate property appraisals

Property appraisals are not an exact science, but they are a crucial aspect of the real estate industry. The idea that you can determine the exact price of a residential property down to the pounds and pence is unrealistic. However, you can make informed predictions about how the market will react to a property based on as much data as possible. This is where property appraisals come in. 

At the heart of a property appraisal are four key areas that are taken into consideration when determining the price of a property. These four elements all have an impact on the price, and it is about balancing these elements to arrive at a sensible valuation of the property. 

1. Condition 🏚✨🏠

The condition of a property is a major factor in arriving at a sensible price. It refers to whether the property meets modern standards of interior design and structural integrity. For example, a property may have a new kitchen with granite worktops and top-of-the-line appliances, but the back wall may show signs of subsidence. In this case, the positive attributes of the kitchen will be cancelled out by the negative condition of the wall, resulting in a lower valuation. 

If you are a residential property developer or an experienced investor, you will know the going rate for works to be carried out. If you are unsure, you can phone a few builders, do some research on what they charge, or even better, invite them to have a look. Deduct the full cost of works to the overall market value of the property in great condition, and it will help you arrive at a sensible price. 

To determine the full market value of a property, you can compare it to other similar properties in the area. However, be sensible, as the cost of getting a painter in to re-do all the skirting boards is not going to affect the value. This is because the market will perceive this as too small to affect the overall value, most likely because they could do it themselves in one weekend with no experience. 

A great way to explore the external condition of a property is through the historical street view on Nimbus. It will show the property's condition from up to 15 years ago, which will show any alterations. 

2. Inflation 🏠📈

Inflation is a developer's best friend because it means the average property price can increase from the time a project is started till it ends. This creates a natural profit margin, albeit small in underwhelming areas. However, if you buy in an area that is up-and-coming, it can be a massive boost to the overall success of the project. 

Inflation is also used as a tool to determine the price of a property you are buying. If you access the previous sold price and the prices have increased since then, you can use inflation to estimate the current market value. For example, if you buy a house for £290,000 in 2019 and prices have increased by 31% (£89,000) since then, the chances are the property is roughly worth £379,000 (in 2023) if in good condition. 

To determine previous sold prices, you can refer to the land registry records, which are integrated into the Nimbus platform. Bear in mind that it takes six months from completion for the land registry to release the records.  

3. Location 🗺

Location is everything when it comes to determining property prices. Properties situated in an area of outstanding natural beauty will generally be worth more than properties on the doorstep of a waste facility. However, these prices will be reflected in the average house price for that postcode. 

It is important to investigate the location and see if you can spot any differences in previous house sold prices based on their positioning. For example, some properties may benefit from sea views on one side and have the other side of the street staring at a cliff face. Understanding the nuances of a location can help you arrive at a more accurate price for a property. For an overview on how well an area is performing our innovative Residential Growth Value feature is designed to provide you with exciting insights into the growth rate (as a percentage) of average residential sales values in your desired neighbourhoods.  

With the residential growth value, you can easily compare the last 12 months with the 12 months prior to identify areas that are experiencing the most significant growth. Our tool is based on the latest census data and offers in-depth neighbourhood-level analysis that is perfect for developers, investors, and real estate professionals. Paired with our other useful features such as the Residential Yield overlay that offers insightful data on the average return on investment in a given postcode, Nimbus is geared towards aiding investors in maximising their returns and making informed decisions about location.  

4. Compare 🏘

Comparable evidence is the benchmark for any negotiation in price. Exploring what other properties have sold for in similar size, location, and condition will help support any opening bid. Find as many properties as you can within 0.25 to 0.5 of a mile and apply the same formulas of condition and inflation to see how they compare, and this will support the price you have arrived at. 

The older the comparable evidence, the less accurate it will be, so try to use the most recent examples. The more like-for-like the comparable evidence, the more like-for-like the price. 

💡 Pro-tip: an easy to remember equation cost of work - full market value = current market value. 

Using Nimbus for property appraisals 

All the data needed to make an accurate price assessment of your next project is available in Nimbus. The platform provides access to land registry records, historical street views, and a range of other unique tools that can help you evaluate a property's condition, location, and value. 

By utilising the four key factors mentioned above, you can make informed decisions about your property investments and maximise your returns. To see how Nimbus can help you with property appraisals, then why not, request a demo, today.