You might also just be asking ‘What is my home worth?’ and a valuation may appear to be the natural way to answer this question.MUST KNOW ELEMENTS:
Here are five ‘must know’ elements of valuations:1. It’s not an appraisal
You may have had an appraisal with a real estate agent, and now believe that your home can fetch in excess of $630,000 on the current market. This may be the case, however a real estate agent’s appraisal is not a valuation, and will not be accepted by the bank as such.While most real estate agents act with professionalism, investors must be aware that it’s not unheard of for real estate agents to alter the appraisal they provide you to match your expectations, and to be fairly bullish with their appraisals to secure a listing.
A valuer, however, is immune to these pressures, tasked with one job and one job alone – valuing your home.2. They’re not an exact science
It will be of no surprise to any savvy investor that figuring out the price of a property is never an exact science, even for those trained in the valuation field. Similarly, obtaining two different valuations also isn’t an unheard of occurrence, and is the reason many investors will head to a different bank to obtain financing, particularly after a renovation.Observer Mark Armstrong refers to bank valuations as being ‘murky waters’. “Remember if a valuation comes in too high and the bank loses money on the loan then the valuer maybe legally liable,” he notes, which may suggest why there is also a general impression in real estate that valuers are conservative with their estimates.
Similarly, it has been pointed out time and time again, such as by Mal James in this article, that valuers are subjective. This is because they are human beings, and they act with the information provided and their knowledge to come up with the best possible response.3. There are multiple types of valuation
While we’re focusing on a fairly rigorous in-person valuation, there are a number of different types of valuations. From the DIY desktop valuation (which have varying results of accuracy), to the ‘kerbside’ drive by valuation, be aware that not all are created equal.RP Data lists four different types of valuation that you'll want to understand:
4. Comparables are heavily relied uponOne of the major aspects that valuers look at to come up with a final figure is that of 'comparables'. That is, recent sales in your area that are close to your property in location and type. A valuer will be required to judge whether your property is superior or inferior to these sales, and so adjust their valuation accordingly. If you want to get an idea of how the valuation may stack up, it'd be worth finding out the latest sales that they will be looking at. This also means that for properties in remote areas, or unique style homes, it will be trickier for the valuer to come up with a figure and, therefore, more subjective and down to interpretation.
5. You can assist the valuerAs with any property, present it with its best foot forward for the best change of securing a good valuation. While valuers do not want to be harassed, told how to do their jobs or provided information that could sway them against the numbers, you can be helpful and provide information about improvements undertaken since purchase.
Be on site, ready to ask and answer questions, and have all the information about your property on hand.Despite the reasons to get a valuation, there’s always the other side of the argument. If you’re considering a valuation, you may also want to hear Terry Ryder’s thoughts on why valuations are a “waste of time and money”. Late last year, Property Observer also covered a heated debate that asked for an ‘overhaul’ of the valuations industry.
Tips for those wanting to get the best from a valuer:
This means that you get the 'real' valuation of your real estate with no hidden agendas.