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Working out how much your property is worth

Michelle Hudson

In Australia, market value is defined as the estimated amount for a property exchange between a willing buyer and a willing seller in an arm’s length transaction, after property marketing, where the parties each acted prudently, knowledgeably, and without compulsion.

Keep in mind the following:

• Cost doesn’t equal value.  In the example of a new construction, the combined sum of the land and buildings don’t necessarily equal the property’s value. Many people over-capitalise in real estate and learn a hard lesson when trying to realise the value of the property.

• Asking/selling price doesn’t necessarily equal value.  Many sellers pitch the price of their property above the market, hoping to sell at a premium price.

• When a real estate agent gives you an estimation of the worth of your property, it’s called an ‘appraisal’.  This is distinctly different from a professional ‘valuation’, which not only takes into account comparable sales, but also specifically undertakes an analysis of the features of the property and its attributes, providing a far more detailed analysis of the subject property.

• The market is constantly changing and a valuation must be no more than three months old due to changing market conditions.

Valuing your valuer
In Australia, a ‘valuer’ is an appropriately qualified and licensed person.  In conducting a valuation, the valuer interprets a range of data, mainly based on market evidence, and also takes into consideration a range of attributes unique to the property.

Why bother with valuation?
Valuations are used for various purposes with the most common being for rating and taxation purposes, and are usually required on a two-yearly cycle.  This allows your local government to assess your council rates based on the value of the property. In addition:

• Banks and lenders usually require a valuation when a customer applies for mortgage finance.

• Valuations are also used in property disputes such as matrimonial separation, insurance valuations and rental valuations.

• Buyers and sellers of property engaging a valuer to assist them in making property decisions.

• Purchasers may also choose to engage a valuer to assist them when they are making an offer.

Choosing your valuer
Ask a potential valuer the following questions before making a decision:

Q1.  Do you have intimate knowledge of the suburb I’m looking in?
Q2.  Are you appropriately registered?
Q3.  Do you hold ‘certified practicing valuer’ status with the Australian Property Institute, or are you appropriately accredited by the Royal Institute of Chartered Surveyors?
Q4.  Do you have professional indemnity insurance of at least $5m?
Q5.  Are you accredited with any lenders?  This is important for purchasers.

NB:  Engage your valuer in writing, so your instructions can be easily interpreted and relied upon.

If you liked this article you might also be interested in these articles about property and mortgage advice:

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Author's Biography

Michelle Hudson is a Finance Broker and founder of The Loan Lady.

Michelle has been in the banking and finance industry for over 30 years assisting people to finance their dreams from motor vehicle purchases through to property and business purchases.

‘I help you find the loans that the banks don’t advertise.’

Email Michelle on michelle@theloanlady.com.au or look at the website www.theloanlady.com.au