In this article, we consult with managing
director of FVG Property Group Mark Ruttner, who specialises in commercial and
residential valuations, to gain his expert insight into how valuers assess and
determine the worth of your home and investment properties and what this means
for you.
First
things first
What should you be looking for when
considering your next property purchase – be it a home of your own or an
investment – with regard to its potential as an equity building asset?
“The first thing I strongly
recommend to anyone, regardless of whether it’s a residential or commercial
property, is to have a valuer come out and look at it before you sign any
contracts or make a firm decision,” counsels Mark.
He says this establishes your
“comfort zone” as a purchaser, based on your own current financial position and
what you hope to gain from the property over the term of ownership.
What
will the valuer look for?
As an overview of what you should
expect from a valuer you engage to provide their expert opinion on a property
you are thinking about buying.
Mark says before they even step foot
inside the premises, they will have done substantial homework into the market
and more specifically, the property’s history.
They will look into recent
transactions over the last six months for comparable properties in the
neighbourhood, based on similarities in building structure, size and land
component and should also check as to whether there are any restrictions on the
title that could impact future use of the property.
For instance, is there a single
dwelling covenant or easements that could impact development down the track?
Once careful analysis of comparable
sales has been conducted, the valuer will physically inspect the property.
“That process will probably take
about ten to fifteen minutes,” says Mark. “The valuer walks from the front to
the back door, taking a brief description of each room or living zone and
looking closely at the quality of finish, fixtures and fittings.
Obviously there’s a variety from
high end to low end, so we’re looking for things like stone bench tops, quality
of carpets, how well the layout and design functions, natural light and so
forth.”
Once the valuer has a detailed
description of the property’s interior, he or she will then measure the land
allotment to ensure all boundaries are in accordance with the specifications on
title and finally, visit some of the other properties identified in the
original market assessment to determine (from a kerb side inspection) whether
they are indeed comparable.
A thorough analysis is then
performed based on the overall land and building component, as well as
confirmed comparable sales, with most valuers generally falling within 10 per
cent parity of market value, according to Mark.
Managing
client refinancing expectations
Ultimately, even though there might
be occasions where valuations come in under or over market expectations at any
given time, the fact is, most reflect the overall market sentiment of the day.
Because let’s face it, a property is
really only worth what someone is willing to pay for it.
That being said, we tend to see more
variables in market valuations on properties where the owner is looking to
refinance for some reason.
Often, the client will have
undertaken renovations and believe that shelling out $20,000 for a new kitchen,
floor coverings and shiny fittings should have doubled the value of their
property almost overnight.
Then there are the clients who need
to refinance as they have become caught between a rock and a hard place due to
flirtations with expensive credit or an extension or renovation overspend.
They decide their property has to be
worth X amount, because that’s what is required to get them out of a fiscal
pickle.
Irrespective of what you need your
property to be worth, it will be valued according to the market conditions of
the day, which is largely determined by what buyers are prepared to pay for a
home in your area. It’s really that simple.
Mark agrees that managing client
expectations can be tough as a valuer;
“I think vendor’s expectations are
always a little bit high. I know personally, my house is worth more than any
other house in our street and everyone has that opinion.”
Ultimately, a professional valuer
will have conducted thorough due diligence to determine the end value of a
property, basing their decision on the evidence at hand.
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