We've all heard that a property is only worth what someone is willing to pay, but what if you need a starting point? With property prices moving rapidly, what a property was worth two weeks ago may be completely different to what it is worth now. This is why property valuations exist and why buyers need to get one.
So what is a property valuation? Essentially, it is a detailed report of the property's market value at a given point in time. It is a legally binding report that an accredited valuer conducts.
Valuations are completed when a specific value is needed to obtain finance, establish the value of a deceased estate, or split assets when it comes to family and partnership settlements. Lenders will need valuations to ensure that the loan to value sits within an agreeable figure and that the market value will cover the outstanding mortgage should there be a forced sale.
If you are buying a house, it is essential to remember that the valuation price is often not the final settlement price. When emotions come into play, as well as other factors such as other bids, the final price is usually higher than the market valuation.
Most people are aware that they will need a property valuation when they buy a home; however, there are many other reasons you may need a valuation.
Let's start with the most common reason - purchasing a new home. Property valuations are beneficial for sellers as well as buyers. For a seller, gaining a valuation before you put your property on the market gives you a clear indication of the value and a starting point for putting a price on your home.
While most homeowners gain an appraisal from a real estate agent, this is only an estimated market value in the current market. It gives you a great understanding of where your home is sitting in the current market. But if you want a more detailed report, a valuation is of more benefit.
Buyers often need a valuation as their lender requires one. It ensures that the bank or mortgage lender is happy with the market value. While some banks still have their own registered valuers or use an assessment done online, more and more, they are utilising independent valuations companies that the lender has on their panel.
But, what if you are buying with cash? Ideally, you should still get a valuation done to ensure that you aren't paying too far over market valuation.
Outside of buying a home, you may need a property valuation done for taxation compliance or financial reporting, mediation for family law matters or when you want to refinance to renovate or add extensions. One other reason for obtaining a valuation is for compensation for easements and land acquisition.
If you've had a property appraisal done previously, then you may be familiar with a comparative market analysis (or a CMA). When your property is being valued, the valuer will start by comparing other properties recently been sold nearby. This comparison usually needs to be of properties within a set distance and time frame from your property.
On top of this base comparison, a valuer will look at a few other aspects of your property, including:
The size of the property and the land
The number, types and sizes of rooms
Quality of the fixtures and fittings
The structural condition of the building, as well as what the building is made from
Standard of the fit-out
Ease of access, both via vehicle and foot
Local council zones
The location of the property and what is in the surrounding area
The aspect and layout of the block.
Before the valuer arrives at the property, they will have taken a look at recent comparable sales in the area to give themselves a base ballpark figure. Once they turn up at the property, adjustments are made to the initial ballpark figure, taking in the points above.
The two main questions asked when it comes to property valuations, whether from current homeowners looking to settle a family property dispute or from those buying, is ""how long does it take?"" and ""how much will it cost?""
Let's tackle the cost first as it is a variable cost depending on the size, location and value of the property and the valuation company used. In most situations, a valuation will cost in the vicinity of $300-$600 and includes a report that is turned around within a few days. If you are buying a niche property, the cost may be higher.
Are you thinking about selling and wondering how to increase the value of your home? While you can't change the location of your property, there are changes that you can make which will add value to your home. However, it is important to consider how much you will pay compared to how much the value will increase.
Consider adding to your home - an additional bathroom, bedroom or entertaining area are some of the best ways to add value to your home. If you already have an outdoor-entertaining area, consider the indoor-outdoor flow; perhaps you could upgrade your sliding doors to French doors or bi-fold doors to really open up the inside of your home.
Tidy up the garden and remove any overgrown trees or structures that aren't needed. This is one of the easiest ways to increase the value of your home. By removing overgrown and untidy gardens, the curb appeal of your home - that is, the first impression, changes. Replanting your garden out with easy to maintain plants is a great mini-makeover.
If you don't have a large budget but want to give your home a new life, focus on the kitchen and bathroom. These are the important rooms in the house and can be renovated on a budget - updating the cabinetry and benchtop, changing the light fittings, and updating the taps are great budget-friendly options.
Painting can make a room feel brighter and more welcoming. Hiring a professional painter is an easy way to makeover your home. If this isn't in your budget, washing your walls down with sugar soap and a flat mop can make a big difference to how the room looks.
A general tidy up will be a benefit when it's time for a valuation. First impressions count and minimising your goods where possible can make a room feel bigger, more open and more welcoming.