How to calculate a home's estimated value?

It can be confusing to understand the true value of a home and how much you should purchase a house for in the current market.

Home Ownership
Erin Howell

It can be confusing to understand the true value of a home and how much you should purchase a house for in the current market. There are a lot of numbers that come up in the home buying process and it is costly, so every dollar counts.

At OwnHome, we support our customers by completing detailed valuations and analysis of areas and particular properties to make sure we buy great homes at great prices. 

After buying dozens of homes, we are confident that gathering and analysing data is the best way to make sure you aren’t overpaying for a property or better yet, ensuring you pay under market value.

How do you value a property or what should you look at?

Determining the value of a home goes further than just looking at the listing price that was chosen by the real estate agent. Property value constantly changes due to market conditions, the local area the home is in, the size of the property and the land, recent sales and home improvements.

It is crucial to be prepared and know what to look for when you are purchasing a home, as one home can be distinctly different in value to one on the same street. Below are the top things to consider when looking at market trends to inform the best purchase price of a home.

Desktop research

Start your research journey online. Start researching the areas you want to live in and the growth trends in these areas. Look into the real estate agent, the agency and other local agents to ensure you have a good pulse on the market and where their sales land. This will also help you find comparable properties that have sold in the area.

Take the time to understand the following in detail:

Similar properties/market depth

What else is for sale in the area? How many homes are in surrounding areas with similar characteristics e.g. a 4 bedroom, 2 bathroom home with a large backyard? What price are they listed for? Are they superior, similar or inferior to the home you are looking at?

These data points will help you place the home you are looking for on a scale so you can see its worth in comparison to other things in the market.

When looking at a property online look out for: ‘renovators delight’ and ‘brimming with opportunity,’ these are usually good signs that a home needs... work!

Comparable sales

Find 3-5 comparable recent property sales. Understand what properties sold recently and how much they sold for. How long was each property on the market for? Who sold it? This will help provide timely context to form facts about the market value and is the most simple way to undertake a comparative market analysis.

Have a look on or domain and filter homes by sold recently. This will help you see the most recently sold homes and what they are selling for. If a home says ‘not disclosed’ or has no price listed, this may be because the vendor has decided to not share, or because the home hasn’t settled. In saying this, if you call the selling agent, they may give you a range.

Gather data from automated valuation models (AVMs)

Domain, Vali, CommBank, and CoreLogic are a great start. Your bank or broker may be able to give you access to the CoreLogic area and property data.

These websites run are an online valuation tool that run data through an algorithm that provides estimate of what the property could be worth. While these are helpful, they shouldn’t be your only source of data. These should only be seen as a home value estimator.

Check out the market conditions 

What are the auction clearance rates?  How long are homes taking to sell? Has the market price dropped? Are interest rates still rising?

Quick research into the local property market will help you understand the market depth (the supply of properties in a certain area), the average sale price and any recent shifts.

The information you gathered from seeing the home

The best way to know the value of a home and if the numbers are supporting the value is to go and see it.

The rule of thumb is that lower clearance rates imply the Vendor’s expectation is not being met, which implies a mismatch between vendors pricing expectations and a buyer's willingness to pay. This lower clearance rate means less properties are selling - indicating a slowing market.

Valuing a property

Once you’ve completed your desktop research, you’ll know how much the property will likely be valued on the open market. However, every home is unique. Each property will have features that will impact the value of the property.

Features that typically drive up a home price

  • Brand new renovations and home improvements
  • Number of bedrooms and bathrooms on top of other properties
  • Approval for extensions and upgrades or approvals to build/rezone the land
  • Close to great transport networks and facilities
  • Within school catchment areas
  • Land size that the home is on, including backyards
  • Internal floor space
  • Location, including if the place is on the main road with noisy traffic
  • Car spaces
  • Location to amenities 
  • Ability to add value 

Features that typically drive down a home price

  • On or near a noisy road or busy complex
  • Outside of school catchment areas
  • Renovations required
  • Significant building defects or pest-related issues

If your desired home has many value-driving features, it is likely to be more expensive than an identical home that sits on a noisy street.

It is important to look at comparative sales and the data to understand if the property you are looking at is superior or inferior to a recent comparable sale. 

Things to look at if you are buying an investment

If you are looking to buy an investment property, or are looking to rentvest in Australia, there are some other data points you can consider when buying a home. This won’t particularly impact the value of the home, but it can impact the value of the investment and the return on investment you will receive. These include:

  • Rental Yield in the area
  • Suburb long term growth
  • Vacancy rates
  • Property taxes or the costs you will need to buy an investment like; real estate listing fees, stamp duty and capital gains tax when you sell in the future.

When a bank values a property, they look at similar features to OwnHome, including

  • Whether a property is comparatively inferior, superior or similar to others in the area
  • The state of the local market 
  • Previous area growth and future potential

Understanding the value-driving factors is essential to know if your paper valuation is fair, competitive or overdone.

The critical step here is to define the top limit you’d be prepared to pay for the home happily. Don’t go above this.

When you purchase your home, typically in the cooling-off period, your lender will complete a professional appraisal on the house to ensure that the home is within an acceptable purchase range. The valuer will visit the property and assess the quality, materials, build and price based on other homes in the area.

In saying this, you must do your research to ensure you haven’t overpaid because if you pull out of a sale due to financing issues, this can cause a loss of your 0.25% deposit in the cool-off period.

There are many data points and ways to approach valuing a property price. You must research to ensure you aren’t overpaying for a home and are competitive with your offer.

If you’re looking to navigate the buying process check out our ultimate guide to bidding and negotiation. Or, if you’re looking to discover some additional options for how to get into your own home, check out some of our articles on rent-to-own vs a traditional mortgage or rent-to-own vs paying LMI.

If you are still wanting to know more, check out how rent-to-own works or if its a legitimate way to buy a home.

If you want to know more about your personal circumstances, Discover Your Buying Power With OwnHome.

Disclaimer: This article is intended to be general in nature and is not personal financial product advice. It does not take into account your objectives, financial situation, or needs. In particular, you should seek independent financial advice and read the relevant product disclosure statement (PDS), target market determination (TMD), or other offer documents before making an investment decision in relation to a financial product (including a decision about whether to acquire or continue to hold).

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