Valuers show up,
poke around and then send a verdict to the lender about whether the price paid,
or estimate made, ‘stacks up to market’
It can feel like there’s bad news pending,
particularly in a softer property price cycle – but the discomfort is mostly
fuelled by a fear of the unknown.
What exactly are
they doing in there?
What is it they’re
looking for?
Is there anything
you can do to lift your chances of a positive outcome?
Well, I’m here to
tell you that in many ways, your concerns are unwarranted.
There is a science to valuation that can help you understand the process.
What do property
valuers do?
A property valuers very different from a real estate agent, although they will look at similar
things.
A real estate agent
tells you what he thinks the market will pay for a property, often advising on
ways you can maximise the outcome and boost the end result.
Avalueris,
similarly, giving an assessment of what the property should achieve on the
market, but theirs is not from the perspective of a marketer.
Avaluer’s
take is all about market value based on evidence and assuming the
holding is sold ‘as is’ on the date they inspect it.
Those two approaches
can bring very different results.
Property valuers are highly trained and expertly qualified.
And they’re
independent.
They work for a
number of people, from governments to property developers, but a big part of
their business is from banks.
Banks employ
valuers to help them determine if the property is adequate security for a loan.
If you’re buying a
holding, they will have reference to the contract price.
But if you’re using
a property you already own as security for your finance, then it takes
additional skill to lock down a current market value.
What do they
look at?
There are two main
methods that residential property valuers employ when determining what a place
is worth.
The first, and
primary approach, is called the direct comparison method.
This involves the
analysis of recent sales of comparable properties in the local area over the
past six or so months and seeing how those sales compare to your property.
By using sales
evidence in close proximity to your home, the valuer is able to
account for the way buyers view important locational factors as well.
The second is known
as the summation method.
This is where they
sum together the added value of the land and its improvements, including the
house and other ancillaries like a pool or landscaping.
It requires such
skills as allowing for depreciation due to wear and tear or economic factors, a
working knowledge of construction costs, and ability to assess over capitalisation.
Land facets
When assessing the
value of the land in a given location, it’s about much more than size.
Avaluerwill
look at shape, dimensions and topography too.
They’ll also look
at position, aspect, and views.
They are taking in
where the sun falls on the dwelling and yard. They’re considering access and
exposure to noise and other factors.
All of these things
impact the value of the land.
A derelict old
house on a waterfront block will still fetch pretty penny, whereas a mansion on
gullied block with a sharply slope might be a bit tougher to sell than you’d
imagine.
Inside matters
too
Land value is
certainly the launch pad for value, but improvements are where things rocket.
With the house,
property valuers look at the floor space of a dwelling, and how it’s utilised
through great design.
While bigger square
metres do tend to justify a higher figure, smaller homes that are sympathetic
to making the most of what they offer their residents will be rewarded with a
higher value.
After all, a rabbit
warren of a floorplan will see some dollars shaved off compared to a really
well-thought-out flow.
The number of
bedroom and bathrooms matter too.
If a four-bedroom
home has only one bathroom, this will affect the value.
And of course, the
condition of the bathroom is important.
If it’s old, dated
or falling apart, that will cost you.
Similarly, the
kitchen is critical.
It’s the heart of a
home, so its size, condition, and inclusions are all taken into consideration.
In fact, the
quality of fixtures, fittings and features throughout a home – and
how they relate to each other and maximise liveability – is a critical
consideration in value.
Other things that
valuers will look at is car accommodation.
If there’s secure
off-street parking, preferably in a lock-up garage, then that’s a big tick.
Even a driveway
space is better than nothing.
And of course, any
other improvement to the site will generally add value – from a swimming pool
to a tennis court or granny flat… even down to fencing, landscaping and
driveway.
Thevalueris
also considering what may or may not be an over capitalisation in a particular
area.
Are pools the norm?
Are buyers willing
to pay substantially more for one in this suburb?
Thevaluerwill
consider this in their assessment.
The
neighbourhoods
Valuers don’t just
look at the land and dwelling that the bank is lending for.
They also consider
elements beyond the boundaries.
They’re looking at
what types of properties are neighbouring and how these might impact value.
They will also
assess the value impact of the area you’re in.
They will look at
the proximity to schools and lovely parks that families consider important.
They’ll look at
lifestyle amenities and public transport aspect.
Shopping centres,
retail strips, hospital facilities, and employment hubs also play a part.
Any planned or
in-progress infrastructure could also contribute to the value of the dwelling.
Can you
influence value
Setting aside the
idea of major renovation, are there things you can quickly do to help a valuer reach
your estimate of value?
Firstly –
presentation helps, so if you have a valuer arriving, mow the yard,
clean the house and remove any out-of-place items.
This can lead
a valuer to think – even subliminally – that this is a
well-maintained home where the owners take pride.
Valuers are
independent and specially trained, but even so, if it looks like a hoarder’s
den when they arrive, it could be hard for them to see through all the junk to
get a clear picture of what the property is worth.
Secondly, complete
those uncompleted tasks.
Don’t have a valuer arrive
when just half the garage walls are painted, or a vanity has been removed and
you’re waiting for a replacement.
Thevalueris
compelled, by lender guidelines, to value ‘as is’ on the day.
If the house is
incomplete, they have to report it to the lender.
Finally, put
together a folder of supporting, relevant sales evidence that aligns with your
estimate.
Ask local agents
for recent sales, particularly in a rising market, and provide these to the valuer.
Understanding the valuation process helps put your mind at ease, and allows you to
adopt a plan for the best possible outcome.
article source: https://propertyupdate.com.au/
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Jason Gwerder
Tuesday, 9 February 2021
