The most common way the market, and also agents, valuers and buyers, value your home is by way of comparison. This is how it works.

Say a 150-square-metre unit on the second floor overlooking the ocean sells for $500k. Then, a month later, the one next door comes up for sale. It’s identical in all respects. Logic would say it’s worth $500k. So, when valuing a property, we make comparisons and adjust for the difference.

If the house sold last week has two garages and yours has one, we adjust accordingly. If the one down the road is on a bigger lot, we adjust accordingly. You’ve got to be beware of adding on invisible costs here.

Take a look at this scenario. Two identical houses are built on lots of the same size. One is close to the road and it only costs $7,000 to put utilities in. The other is at the back of the site and the utilities costs $15,000. Would you pay another $8,000 for the second house? No, I doubt it. Some things just can’t be added onto the price.

The most common ways we get this wrong is when we’ve spent money on the house. And when we do that for two main reasons.

The first is enjoyment. The kitchen was adequate but you didn’t like it so you replaced it. Again, it comes down to comparison. The market won’t pay you the whole amount you spent on the kitchen unless it’s reflected in the market value. A buyer may make an offer on your home first, or choose to offer more than the house down the road, but they won’t just give you what you paid for it.

The second reason is spending money on maintenance. Again, same story. One roof is brand new, the other is adequate. A buyer might up the offer a tad but they won’t just add the cost of the new roof unless it’s reflected in market value.

Getting up-to-date comparisons is one of the reasons you need an agent. You can find some of the information you need but often this can be 3-6 months old and out of date. Agents know what sold yesterday. If you wish to be a part of this process, get the list of comparables from the valuer or your agent and take a look at homes yourself.

You’ll pretty soon get a feel for the values in your area, and then you can apply them to your own home.