Author: Maria Berto, National Director - Residential
Every day, people in Australia and New Zealand ask our valuers what they do.
Not everyone knows what property valuation is, why it's done, or what it entails. This isn't surprising, because getting a valuation isn't a regular occurrence, but most of us will need one at some point in our lives.
Here is a short explanation of property valuation, how it works, and why it's important to your lender, broker or bank to seek a valuation from a qualified expert.
When do you need a property valuation?
There are several reasons for obtaining a property valuation. Some of the most common reasons are:
- 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, a valuation can help you set an informed asking price for the property.
- Pre-Purchase Advice Before you make an offer to buy a property, a valuation can help you understand it's market price, and ensure 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 needs 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.
- Insurance Commonly required to determine the amount of insurance required, either for the purpose of establishing insurance cover or to update the sum to be paid.
Did you know?
Banks, lenders and brokers typically use an independent or third-party property valuer, who will often be appointed by a panel management company to ensure a non-biased and transparent valuation. In most cases it is a requirement these assessments are conducted by Australian Property Institute or Property Institute New Zealand certified valuers.
What does a property valuer do?
A valuer will conduct a detailed inspection of the property internally and externally:
- Measuring the building and making notes on any significant improvements
- Examining and taking note of the building details and condition
- Noting any obvious or major structural faults
- Identifying the number of rooms (bed/bath/living), layout, presentation, fit out, fixtures and fittings
- Noting any ancillary improvements such as sheds, verandas, 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.
Through the process, the valuer will examine all relevant data applicable to the property (recent sales), and check for any market and property risks. 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 include ‘comparable’ sales evidence to support the determined 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.
The valuer's report plays a critical role in providing you and/or your advisor, bank, lender, or broker with confidence that they are giving you the right product, service, or loan amount for your situation. The report acts as a solid foundation upon which well-informed recommendations and decisions can be made to ensure utmost satisfaction and financial security for you, the valued customer.
