PROPERTY VALUATIONS: WHAT YOU NEED TO KNOW
In this fortnights newsletter we will discuss how a property valuation differs from a property appraisal, what will the valuer be looking at?
How you can add some value to your property? Lastly ways to think like a property valuer when investing in property.
Property valuation versus appraisal
Investors and home owners are sometimes surprised by the substantial difference between a market appraisal and a valuation. Real estate agents provide property appraisals using their local knowledge of sales in your neighbouring area and their professional experience.
It’s an agent’s job to get the most for the seller of a property through marketing and sales techniques. However, a property valuation is independent of an agenda and based on facts. It is a key part of the bank’s lending process along with other elements like employment and credit history, or your ability to pay back to the loan. It is definitely not the job of a valuation professional to speculate when determining the value of a property.
A major happening that i see all the time in the realestate industry is 'The endowment effect', this is when people have ownership of something (or have a feeling of ownership) there is a cognitive bias towards their own product (in this case property) and believe it has more value then it objectively does. For this reason it is so important to get a proper valuation and appraisal.
“People often require more money to give up ownership of an object than they would be willing to pay to acquire that same object” -Kahneman, Knetsch & Thaler.
What will the valuation expert be looking at?
In determining the value of a property, the valuation expert will visit the property and look at numerous things including land and building size, construction details like the type of materials used in construction (for example, fibro or brick), the location, other sales in the area, the condition of the existing dwelling, and ancillary details like pools, garages and off-street parking. In the case of off-the-plan, the relevant information doesn’t come from the glossy sales brochure but rather from the builder’s plans and tender. Also, finding out what and when they are going to build and any additional gestures.
It’s worth remembering that there is no point in indicating to a valuation professional that you intend to make improvements because assessments are made “as at today”.
Simple ways to add value to your property
Marble bench tops, fancy Miele appliances and the latest light fixtures will cost you a lot, but may not necessarily translate too as high of return as anticipated.
However, things such as the following will work in your favour.
- Neat yard and trimmed Lawn
- Clean and tidy interior ad well as removing any clutter that's lying around.
- Dirty, damp patches and mould will not help your cause.
- Clean windows
Ways to think like a property valuer when investing in property
- Views: Can you build up or replace a wall with sliding glass doors/windows to take advantage of a view?
- Extra rooms: However, those rooms must fit in with the floor layout and continuity of the property – an eight or nine room “rabbit warren” won’t help.
- Location: This is always important, especially if the property is located near a railway station, schools or shops.
- Square meterage: The bigger the better when it comes to property size.
- Garage, carport or off street parking: This is particularly important if the property is in the inner city where parking is at a premium.
- Granny or “Fonzie” flats: This remains a popular trend especially with the potential for doubling your rental return.
These aspects are usually good to consider if you have ever been disappointed by a past experience where you have put a lot of effort into the interior design, only to find the valuation price didn’t reflect what you considered as the market price or even the weekly rental price.
If you have any questions or queries about this article please feel free to contact me on 0416810015 and we can have a chat about it.
Allison Davine - Davine Realty