A property valuation is one of those things that is a necessity for anyone who may be involved in any aspect of a property transaction. Whether you’re a homeowner or a lender, you’ll want to know how much a property is worth. This helps with crucial financial decisions. For that, you’ll need a certified firm like Melbourne Property Valuers Metro. Such experienced professionals will give you an accurate assessment of a property’s current market value that you can submit in any financial or legal proceedings.
Property valuation is an age-old practice. Even in ancient times, there were people designated to conduct this process. These days, it is more streamlined and structured, with clear guidelines as to what can be done and what is expected.
Property Valuation is a Process
A professional property valuer is someone who is trained and certified to assess the current market value of a property. In addition to the extensive training that these professionals undergo, they also have to be registered with a local authority. The process of property valuation, while seemingly easy, can have serious ramifications. Many parties, including property owners and institutions like banks, rely on the figures provided by property valuers. This means that property valuers must ensure that the figures they provide are inscrutable.
It’s crucial to remember that any figures provided during a property valuation process are “as is.” This means that future additions to the property will not factor in. For instance, a homeowner may claim that they would want to build a swimming pool on their property in the near future in an attempt to bolster the property’s value. A property valuer does not take such claims into consideration when assessing a property.
The process of property valuation involves three key steps. These include:
A property valuer tends to inspect any property based on three key aspects. These include the land, the dwelling, and the other additional structures or improvements.
Land refers to the exact physical location of the built structures. Its inspection will consider the topography, size, dimensions, and such aspects.
Dwellings refer to the age, size, construction, utility, layout, accommodation, and general condition of the property. When property valuer inspects these aspects, they try to picture themselves as a potential buyer and make an impression on the property.
Additional structures include fences, a driveway, a swimming pool, a tennis court, and other such structures that stand separate from the dwellings.
In addition to taking measurements and inspecting the structures for any damages, a property valuer will also use other sources like town planning to get a comprehensive picture of your property.
2) Sales Evidence
A property valuer will then look at recent property sales in your neighborhood or county. This will give them a good idea of what your property will be worth, considering all other factors. This method of determining a property’s estimated value based on the values of others surrounding it is called the Market Approach. This involves contacting local realtors, databases, or listing portals for all properties in the area. A property valuer will typically pick about five or six properties recently sold or bought in your neighborhood. Their job will be to determine, in dollar amounts, how much better or worse such properties were compared to yours. For example, if a property similar to yours in almost all dimensions sold for $1 million but was built more recently than yours, expect your property to have a valuation of less than $1 million.
3) The Report
Once a property valuer is done inspecting and examining all the different aspects of the property, they’ll then sit down to create a comprehensive report. The report will contain not only their estimated property value based on all the factors they’ve examined but also their general impression. Sometimes, such impressions can have a significant bearing on key financial decisions regarding the property. For instance, if the property valuer remarks that a high-tension power line traverses your property, this can signal a certain amount of risk. This will lead to a lower valuation. Similarly, if the economic conditions in a particular area are making people reluctant to buy homes, such remarks by a property valuer can hold sway with institutions like banks, who may refuse to issue a loan based on such factors.
Ultimately, a property valuation considers several factors while utilizing different methods of valuation. In addition to the market approach of valuation, there are other methods like the profits method. This is used when there are no comparable properties whose sales can be compared to the one being assessed.