We’re here to help by passing on what we’ve learnt in our own property investment adventures.

On the go? Here’s 30 seconds of key take outs:

  • By leveraging your property valuation, you can keep growing your investment portfolio. You need to ensure that your lender is getting the best possible valuation on your property.
  • There are many types of valuations to meet different needs but the criteria that accredited valuers use to calculate valuations are pretty consistent. Understanding what these are will help you decide what you need to do to lift the valuation of your property.
  • The secret to a better property valuation could be as simple as tidying up the front garden or upgrading fixtures and fittings.

Keep going >>

There are two types of assessments that property owners and prospective purchasers consider when they are talking about the value of a property.

You’ll hear the terms market appraisal and valuation thrown around like a frigate on a moody Bass Strait but they are not one and the same.

What is a market appraisal?

A market appraisal is an estimate from a local property agent or selling agent to help them determine a listing or selling price based on recent comparable sales that a local sales agent knows about.

Real estate transactions often require market appraisals because they occur infrequently, and every property is unique. A market appraisal is NOT a valuation and is only used as a price indication to list a property on the market. It cannot be used by a financial lender to calculate the amount of money they’re prepared to lend to you.

What is a valuation?

A property valuation, market valuation or bank valuation is a formal indication of the real value of the property at a specific point in time, as assessed by a qualified property valuer.  In its simplest form, from a lender’s perspective it is the value of the property they are confident that they can recover if you default on your mortgage. Valuations are mostly valid for three months for this reason (think 90 day settlement …).

The valuation process is a complex one, linking the review of current market data and analysis of the local property market.

Property valuers are responsible for assessing the value of residential, industrial or commercial properties. They assess the value of land, buildings and improvements, and plant and machinery.

There are different types of bank valuations that are conducted including:

  • Up front valuations: These valuations are completed by an accredited valuer on behalf of a bank or financial lender. A physical, walk through inspection may be involved. This type of valuation is carried out before you submit a loan application.
  • Desktop valuation: This type of valuation is conducted usually based on photographs and current property market data, without a physical inspection. These valuations are generally carried out in a confident property market where the loan to value ratio is low.
  • Drive by valuation: These valuations are usually conducted by an accredited valuer when valuing a house and land package where the house hasn’t come out of the ground yet. In the absence of a construction, a site inspection is required to inform the valuation.
  • Walk through valuation: This type of valuation is where a lender sends out an independent valuer to inspect the property inside and out and write a report, including photographs and measurements. This is the most common type of valuation, but is also often the most time consuming.

What criteria do accredited valuers use to value your property?

The big question is what is a valuer looking for to calculate a valuation? What criteria is factored into the equation? Once you know the answer to these questions, you’re in a solid position to seek out the best valuation for your property.

In summary, an accredited valuer is trained to consider (listed in alphabetical order):

  • Architectural style and appeal
  • Aspect, size, frontage measurements, topography and layout of the block
  • Land value and improvements less depreciation of the property since it was built
  • Living areas, number of bedrooms and bathrooms, kitchen size, garages or car ports, and outdoor spaces
  • Location of your property to infrastructure and amenities, such as freeways, public transport, shops and schools
  • Potential for development or renovation
  • Presentation – particularly street appeal for drive-by value
  • Quality and condition of fixtures and fittings.

Based on the above criteria, a valuer will do one or take a bit of both of two assessment methods:

  • research comparable property sales within the last six months, and assess your property
  • calculate land value plus the improvements on the land, based on considering the criteria summarised earlier.

How can you get the best valuation for your property?

Based on understanding what a valuer may be looking for, here are some tips for getting a better valuation on your property.

  • You can’t change a location, so ensure to always do your property market research before buying a property.
  • Consider upgrading or adding improvements to your home.To find out how and reduce the risk of overcapitalising on improvements, read the blog article Casting the net on renovating versus maintenance on your investment property.
  • Upgrading the quality of your fixtures and fittings can be an effective way of improving the presentation of your home, particularly when it comes to a full or walk through valuation.
  • Improve the street appeal of your property, a garden tidy up or makeover or giving the front fence a new lick of paint, is a good way to lift the drive-by value.

You can’t always choose the type of valuation a lender insists on, but if for example you’ve just upgraded all your fixtures and fittings, consider proactively asking for a full walk-through valuation. If you’ve simply given the front garden some love and attention, a drive by valuation or desktop valuation will work in your favour. See where I’m going?

And if you find yourself a little stuck about your next investment, or what to do about your existing one, our property investment mentors are always eager to help. Call us on 02 9222 9444.

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