VOne of the houses in the new scheme in Vineyard Town. - Winston Sill

At nearly 36-years-old, Carolyn is on her third visit to the real estate valuator. And not only has she never bought a house, but she is not sure if this one is the elusive 'it'.

Still, she continues to look and, very importantly, gets a valuation done before sinking in any real money, as she puts it. Her reasoning is simple: "I will not be buying anything for more than the market value. As a matter of fact, I can't buy a house for more than the market value, because I will be getting a mortgage and the bank or Housing Trust won't lend more than the official valuation."

This holds true not only for real estate but also motor vehicles, once a financial institution is involved. As a loans officer at a credit union put it, "we need to ensure that if we need to recover the funds due to non-payment, the item can be put on the market with reasonable expectations of recovery in the short term".

A valuation is done by a professional assessment officer, who is trained in the field. One who is about to enter the real estate field, literally and figuratively, is Ewan, currently studying at the University of Technology (UTech). "A residential property, which is what most people will be buying, is valued based not only on the building itself, but the conditions of the general surroundings, proximity to facilities such as hospitals and the police station, even the road condition. It is a lot of things that go into the calculation," he said.

And Richard, a seasoned motor vehicle evaluator, said that a car's value is based on condition and age. However, there is another factor. "You have to look at the resale value, which means you have to look at where the market is going," he said.

He points out that there is a particular value, what the vehicle is worth on the market at the moment, and the forced sale value, which is the absolute lowest the seller would be reasonably be expected to take.

Financial institutions work with the market value.

As for Carolyn, she is very glad that, although she did not enter into a deal, she did the valuations. In fact, it was the valuations which prevented her from making a down payment and signing a binding contract. "For the first one I just loved the townhouse, but what the people were asking because of the work they had put in the place was simply not valued that much. Then, the second one, the valuator picked up some roof faults that would have cost a lot of money to fix and maybe would have left me on the streets in the next breeze blow," she said.

"I know some of the things to look for now, but still I am not leaving it to chance," she said.

Late assessment costs

When 35 year-old Shane was looking at purchasing his first home last year, he took a trusted relative to see his dream property.

"I saw this place advertised, out of town but still close enough to not make the travelling too hectic, and it was not in Portmore. It had a lot of land space, which is what I always wanted for the children, and the house didn't seem to be in bad condition. It was not new, of course, but it did not look like a hut," he said.

The asking price was $8.5 million, which seemed very reasonable compared to the astronomical prices on the market, and Shane carried his uncle, who had some experience in property matters, to see it. He was also enthusiastic and declared that the place must be worth at least $9 or even $10 million, as it had just over an acre of land.

Based on that Shane went ahead and made the down payment, the valuation coming after the sales agreement was signed when he went looking for a mortgage. The valuator put the house's market value at $8.2 million, $150,000 under the price Shane had negotiated and signed on for.

"I was lucky, because I could make it up. But for other persons with a tighter margin it would have been a disaster. Respects to my uncle still, but it takes a professional to look at everything. I live in the house now and I love it more than ever, but if I could not make up the money I would have stood in danger of losing my deposit," he said.

"Always do the valuation first," he advised. "People always try to sell for the maximum they can get; it is up to you to make sure you can get the financing before you commit."