What is a Property Valuation?
A property valuation is an estimate of the market value of a property on a specific date and is based on what the property would likely sell for under normal circumstances in an open and competitive real estate market. The valuation conditions assume both the buyer and seller are not under any pressure and have accurate knowledge of the property being bought or sold.
Getting a property valuation may seem like yet another expense but is a necessity for a successful real estate transaction and can benefit both the vendor and purchaser.
A property valuation is generally conducted on request by a property owner or a prospective buyer. A valuation can also be requested by a lending institution such as a bank, who is looking to fund the purchase of a property.
A property valuation is generally produced as a report and includes property information such as rates, building size, physical details about the construction and condition of the dwelling being assessed, as well as details on any immediate issues that may need to be addressed. Information on comparative sales in the area are usually included as well. The valuation will also assess the land component of the property, which can make up a significant proportion of the property’s total value. The size, shape, aspect, and topography of the land as well as the zoning and development potential will be valued.
When would I need to get a property valuation?
A property valuation is an essential component of the home loan application process and as such, the most common time you will hear people discussing property valuations are when lending institutions are financing a property.
If you are borrowing funds to purchase a property or refinancing borrowings already in place, the institute you are requesting the loan from will require a valuation to be done on that property. This is to ensure security over the property, meaning the value of the property is enough to cover the amount you are borrowing. The bank needs to be confident that it can recover any outstanding monies owed on the property by reselling the property should the mortgage regress into a state of default (a mortgage is left unpaid for an unacceptable amount of time).
Most of the lending institutions will use their own preferred licensed property valuation consultant to obtain a property valuation. Outside the banks using valuations for security, a valuation can be very important for people wishing to sell their property as it can give vendors a target price to have in mind as a reserve price as part of the sales process.
What will increase my property’s value?
Listed below are several ways to increase the appeal and therefore value of a property.
Renovating is an excellent way of adding value to a property. Additional bedrooms, bathrooms, a kitchen upgrade or an improvement of flow in the property’s floor-plan will all add to a property’s value. Creating an outdoor entertainment area will also add dollars to your bottom line.
The presentation of your property is also a very important component. A neat garden with good structure and trimmed trees will appeal to prospective buyers. Making vehicle access easy and capitalising on available views can increase a property’s appeal and therefore value.
A lick of paint can freshen up most spaces and adding natural light through an additional window or skylight can be very appealing.
Adding a garage or carport so that vehicles have cover or security can be important in a buyer’s view.
A general tidy up of your property is also likely to benefit the valuation.
How is a property valuation different to a market valuation?
Typically, a market valuation or appraisal will be done by a real estate agent who will look at what they think the property would sell for in the current market. The agent will also take into account any current trends, even if they may be a short term trend.
A property valuation, as well as assessing current trends, will take into consideration a home’s value over the longer term. Bank valuations are, in general, more cautious in comparison to an agent’s market valuation. This is due to the lender wanting to be sure that they won’t be left out of pocket no matter what might happen. Regardless of what an agent or other external expert might say, a lending institution will always base their lending on their own valuation.
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