If you’re an investment property owner, then your piece of real estate will need a property valuation.
It can help with investment analysis, financing, taxation, and property insurance, among many other things. More importantly, a property valuation can help set the asking or listing price for your investment properties.
To get this done, however, you need to hire a property valuer.
So, how can property valuers help with the market valuation?
Read below to find out.
What You Can Expect During Property Valuation
Valuers are experts in the property market. They determine the accurate value of your investments by doing the following:
Formal Property Valuation
There are two ways a real estate agent conducts property valuations.
Through the direct comparison method, they analyse the recent comparable sales in the area within the last six months.
By looking at similar sales, they can factor the land location into the mix.
Another technique is the summation method. They add the improvements to the total value of a property.
For example, if you had surrounding amenities added to your commercial property, they will include it in the final value.
Likewise, they may reduce property valuation according to wear and tear.
Real estate agents know construction costs well and could easily see overcapitalisation.
Detailed Inspection of the Property
A trained valuer will examine the land, but they will consider more than just its size. They will factor in the topography, dimensions, views, aspect, and position.
All of these affect the value of the property. Just think of this: a worn-down house with a beach view is an easier sell than a massive mansion on a mountain slope.
Property Valuation of the Interiors
While the security value of the land is essential, improvements will help you gain more revenue from a willing buyer.
That’s why property valuations include floor space and design, among many other things.
Of course, a bigger property size will sell more. However, you can end up selling a small house for a higher price because of its improvements.
Rooms and Other Improvements
As expected, the rooms in your house will affect your property’s valuation.
Even if you have a three-bedroom home, it may be deemed cheaper than similar properties if you only have one bathroom.
The market value will also depend on the kitchen’s size, condition, and inclusions.
The same consideration is also applied to the rooms’ fixtures, light fittings, and other features.
They will also look at parking, like the driveway space or secure off-street parking.
If you have a swimming pool or granny flat, these improvements can make the valuation higher.
As mentioned, a qualified valuer will look at the overcapitalisation. Even if you have a pool, it will not be that favourable to the valuation if that’s not the norm in the area.
In other words, your mortgage broker will see to it that buyers will indeed pay more for these features.
Informal Valuation of the Neighborhood
The relevant credit provider will look beyond your property features. They will consider other surrounding elements, such as the neighbourhood.
A certified practising valuer will factor in the effects of nearby properties.
Is your home near schools, public amenities, or parks? Are they located near public transportation hubs?
Needless to say, proximity to retail areas or medical centres will have a positive effect on the property valuations.
Likewise, up-and-coming plans (like a shopping centre under construction) will be taken into account, too.
Getting a Property Valuation Report
After doing the valuations, your property valuer should give you a formal report. In this legal document, you’ll see how your agent came up with your property’s market cost.
This detailed report should contain the following information:
- Information or cover letter
- Location of real estate
- Neighbourhood profile
- Site description
- Property’s construction details
- Accommodation details
- Utilities and services included
- General condition
- Date and purpose of the valuation
- Basis and methods of valuations
- Opinion on value
- Limiting conditions
- Stamped signature of the valuer
What You Can Do Before a Property Valuation
Since your investment portfolio will depend on the valuation, it’s best to be prepared beforehand.
For one, it will help if the house is clean in general. Tidy up your place and mow your lawn, as these will positively impact the valuation.
It will also help if you complete all the unfinished tasks in your home. Who would like to see a half-painted room or a closet under construction?
More importantly, make sure to prepare all the documents needed during the bank valuation.
If you need a property appraisal, remember to deal directly with an accredited valuer. Qualification-wise, you should hire a professional with an Australian credit licence.
Whether you’re a willing seller or buyer, their knowledge and skills will significantly affect the valuation process.