We asked one of our Valuers to summarise the property valuation process and what they did as a Valuer. The article was written by Jack Gibson (RPV), a Residential Valuer from Adelaide. We have also produced a 2 part short video series – Venture Into Valuation – documenting the valuation process and starring another one of our Valuers, Henry Pinto (CPV), a Managing Valuer from Sydney.
In my everyday dealings with clients I have noticed that there are a number of people who are not familiar with property valuation or what I do as Valuer. This is not a complete shock, as obtaining a valuation is not something you do every day, but most of us will require a valuation at some point in our lives.
The following is a brief explanation of property valuation, how the valuation process works and the importance of attaining valuation advice from a qualified professional.
When do you need a property valuation?
There are several reasons for obtaining a property valuation, here are the most common reasons:
- Applying for a Mortgage
When purchasing a property or refinancing, your bank may require a valuation of your property to ensure the security value of the property adequately covers the loan.
- Pre-Sale Advice
When you are contemplating selling your property so you can set an informed asking price for the property.
- Pre-Purchase Advice
Before you make an offer to buy a property, so you pay a market price for a property and you are comprehensively aware of exactly what you are purchasing.
- Capital Gains Purposes
Capital Gains Tax (CGT) is the tax payable on the capital gains from the sale of an investment property. A valuation will need to be conducted and provided as evidence to the Australian Tax Office to determine the change in value of your investment and in turn determine if you are liable to pay (CGT).
- Legal Proceedings
An independent property valuation might be required to aid in the settlement and litigation of legal proceedings between parties with a legal interest in property for example divorces, business venture splits and joint investments.
Commonly required to either determine the amount of insurance required for the purpose of establishing insurance cover or to determine the sum to be paid following loss or damage.
Did you know?
The lending institutions (your bank) will typically use an independent or third party property Valuer, who will often be appointed by a panel management company to ensure an un-biased and transparent valuation.
What does a property Valuer do?
A Valuer will conduct a detailed inspection of the property internally and externally;
- Measuring the building and make notes on any significant improvements
- Examining and taking note of the buildings details and its condition
- Noting any obvious or major structural faults
- Identifying the number of rooms (bed/bath/living), the layout, the presentation, the fit out, fixtures and fittings, and any other ancillary improvements such as car accommodation, sheds, verandahs, decking and landscaping
- Taking note of the property’s topography, street frontage, allotment shape, size, underlying zoning and location
- The Valuer will take Photos that are date stamped to be included in the report
Once the inspection has concluded, the Valuer will examine all relevant data applicable to the property such as zoning and planning restrictions, and check for any risk ratings. The Valuer will then compare the attributes of your property to recent comparable sales in the surrounding area to determine a market value.
What is the end product?
A property valuation report is a legal document which includes a legal description/Title Reference of the subject property, along with land, location and improvement characteristics. Property valuation reports will comprise a number of ‘comparable’ sales evidence to support/justify the valuation figure. It is common for a valuation report to include a rundown of recent economic activity, including the current status of the cash rate and other data that is likely to affect the local/national property market.
Thanks again to Jack and Henry for taking us through what they do every day as Valuers. We hope that this has given you a better understanding of the valuation process. Please contact us if you would like to find out more about our services.