Anyone with an interest in a property can stand to benefit from knowing its existing market value. The best way to get this information is to order a property valuation from a trusted expert.
There is a large range of available valuation services the Northern Territory. They are undertaken by Certified Practising Valuers (CPV) who are registered with the Australian Property Institute (API).
CPVs have been trained to prepare accurate valuation reports in line with international valuation standards. Valuers are also careful to meet every regulatory and legislative standard so that reports are legally accepted as proof of value.
A valuation report can come in long-form or short-form. The information that valuers need to prepare reports is dependent on the purpose of the valuation.
Professional valuers have the unique qualifications and insight needed to determine market value for all sorts of properties. Whether you need assistance with a residential, commercial or industrial property.
What information do property valuers need?
So what information is needed for a property valuation? Valuers will have to go through a comprehensive load of information when preparing valuation reports. Getting the important documents ready prior to a valuation can lead to a swifter process.
Some of the information valuers will need to have beforehand includes:
- The blueprints of the property outlining the measurements.
- The title deed and/or rental agreement.
- A list of any property features you feel the valuer may miss.
- Modernise the Kitchen & Bathroom: According to most property experts, these are the two most important rooms in the house. Often referred to as the “heart and lungs” of real estate, these two rooms play a key role in how much your house is worth.
- Information regarding any renovations or upgrades to the property.
When it comes to the information that valuers consider while preparing reports, the following factors are key:
- Location
- Size and space
- Curb appeal
- Building condition
- Renovation potential
- Notable features
- Market conditions
The type of property being assessed and the purpose of the report will guide the valuer on the level of detail to include. The final report will serve as definitive proof of market value.
What is the most important part of a valuation? Each and every step should be considered key, and making sure your valuer has all of the necessary information can make for a smooth process.
The trusted property valuation processes
Certified Practising Valuers are well-versed in several different valuation methods. First, a primary method is chosen to determine a foundational amount, while secondary methods will be applied to refine the final figure.
There are three main approaches used by valuers. These are:
- The direct comparison method
- The income capitalisation method
- The net assets approach
The direct comparison approach
Valuers using this method look at the sales statistics of similar properties in the area. By reviewing what other properties in the area have sold for, valuers can get a good idea of the market conditions. The properties sold must have an identical use to the one being assessed.
Once an average sales price has been determined, adjustments will be made according to the differences between the properties. Any notable features are reviewed and considered in the calculation. This method is mostly used for residential properties.
The income capitalisation approach
The income method is reserved for properties whose main purpose is to produce an income, also known as commercial properties. Unlike residential properties, valuers have to consider the yearly income the property produces as it directly impacts the market value.
Valuers calculate the net operating income (NOI) (gross effective income minus operational expenses) and divide it by the capitalisation rate (cap rate) to reach the market value of the commercial real estate.
The summation approach
This method is often applied as a “check” method to refine the final amounts. Valuers determine the value of each separate component of the property to determine its full value.
The value of the land and the cost of improvements is determined, while provisions are made for considerations such as deprecation. The sum total value of each separate part is equal to the market value of the property.
When is the information in valuation reports useful?
The information included in property valuation reports can prove useful in a number of circumstances. Owners of residential, commercial, industrial and rural properties can all stand to benefit.
A few situations where valuation reports come in handy are listed below:
Mediation, settlements, and legal disputes.
In a dispute involving a subject property, an independent property valuation report can be incredibly useful. The report provides each party with a definitive and clear outline of the property’s market value.
In mediation processes, this can serve as a foundational point for the mediators to guide the negotiation between parties. The report will also serve as proof of value in settlement negotiations or legal disputes. Valuers can be called upon to serve as expert witnesses in litigation surrounding the market value of a property.
Pre-sale or pre-purchase guidance
Of course, knowing a property’s precise market value is a crucial piece of information for individuals considering buying or selling real estate. A valuation report serves as the perfect tool to identify said value.
The market value can serve as a guiding point for sales and purchase negotiations. As such, a much smoother negotiation process is likely, and parties don’t have to waste unnecessary time debating market value.
Loan and refinancing applications
When applying for a mortgage, banks and financial lenders need to know the market value of the property. This is used to determine the LTV (loan-to-value) ratio; the value of a property in contrast to the amount of money being lent through a home loan.
The LVR amount is calculated as a percentage and used to determine the risk of granting a loan. The lower the LVR, the lower the risk for the lender. A good LVR can help avoid additional loan fees such as Lender’s Mortgage Insurance.
Rental review and determination
A property valuation for rental review is a great way for landlords to prepare lease agreements in line with the existing market conditions. As conditions are constantly changing, each time a contract ends, the new agreement must reflect the current state of the market.
A rental valuation provides owners with a detailed analysis of value and how much an appropriate rental amount would be. This can lead to much smoother negotiations when looking for a tenant.
Summary
A property valuation is one of the most important services for owners, investors, and sellers of property. A valuation report will clarify the property’s existing market value.
The information that you can provide valuers with prior to an inspection includes blueprints, lists of notable features, title deeds, and any details regarding renovations.
Valuers will consider a number of different factors when preparing reports. This includes location, size, space, street appeal, and building condition.
There are a few different approaches that valuers may follow when preparing reports. The three most common methods are the direct comparison approach, the income capitalisation approach, and the summation approach.
Valuation reports can be useful in all sorts of circumstances. Whether you’re in the midst of a dispute regarding property or need guidance before a sale or purchase, an independent valuation can help.
