Friday, January 29, 2010

Estimation versus expert valuation

There is often a lot of confusion on property forums about the different terms used when it comes to arriving at an idea of what price your French home might fetch on the open market - or if you are wondering whether the property you are thinking of buying is really worth the asking price.

Estate agents have to arrive at some kind of estimate of the 'value' (potential sale price) of a property they wish to take onto their books. They will take into consideration the age and condition of the property, the local vicinity (proximity or not to shops, schools, transport), and the asking price of similar kinds of properties currently on the market. The methodology is essentially crude and largely based on the agent's experience and familiarity with the local market. The result will be an estimate ('estimation' in French) with which the owner/vendor may or may not be happy.

A formal valuation - for example, for probate or as the basis for a bank loan - is normally undertaken by a specially qualified 'expert immobilier' who will produce a lengthy and detailed report, and for which he will charge a fee. You need to allow around 1000 euros for this - less than the cost of a square metre of average French real estate!

Anecdotal evidence indicates that owners consistently over-value their property, despite informal and expert assessment. Expectations may be unrealistic or vendors may be seeking a target sum they wish to achieve, in order to cover the cost of renovations carried out or to fund another purchase. If a property is for sale privately, potential buyers need to be aware of this tendency and to take particular care that a property is not being offered for more than it is worth.