Would it make sense to take the plunge by acquiring a property without knowing its exact value? Not in the slightest. Thanks to property valuation, you can estimate an asset’s value. This could include a residential or commercial building, land, antiques, machinery – the list goes on.
Property valuation isn’t conducted by any self-proclaimed ‘expert’. Instead, it requires a licensed valuer’s input to establish all the variables in play. You may also appoint a chartered surveyor to value a property.
When seeking valuation services, look for professionals with requisite credentials and experience to back up their work. For instance, Melbourne Property Valuers Metro comprises a team of proficient and qualified personnel with in-depth local real estate market knowledge. The firm is also accredited by the Australian Property Institute, implying you can bank on them for credible or reliable valuation reports. Let’s spotlight some other elements you might need to know about property valuation.
The Reasons for Valuation
A valuation report helps determine the exact value of a property and its worth in comparison to other similar assets. Thus, investors, financial institutions, enterprises, and government agencies can make informed decisions when transacting or reviewing properties. Some of the scenarios that may necessitate a valuer’s involvement include the:
- Acquisition of properties – Valuation makes it easier to determine whether to proceed with a purchase based on an asset’s reported value.
- Meeting legal requirements – It also helps legal entities determine how much to pay in taxes or other associated costs. The report also provides a basis for compensation in expropriation cases or inheritance taxes. When purchasing an insurance policy, a valuation report can also help determine the amount of coverage you require and the premiums payable.
- Loan lending – Financial institutions use valuation reports to ascertain a property’s worth and set limits for loan amounts.
- Divorce proceedings – A valuation may help divorcing couples decide how to divide their shared assets, such as a home or rental income.
- Property disputes – A valuer can help resolve a conflict between two parties involved in a property purchase or sale by offering impartial insights.
Property and Market Valuation Are Different
While property valuation refers to a particular asset’s actual or estimated value, market valuation considers a property’s value in the existing market. For instance, if you own a property in a prime location, its market value may be higher than its actual value due to prevailing demand.
In contrast, a property in an area deemed less attractive may have a high actual value but a low market value. Thus, while property valuation concerns the intrinsic value of the real estate asset, market valuation entails the estimated price buyers are willing to pay for a property. What’s more, property valuation is a formal and data-driven process – it assesses various aspects as outlined below) to establish value.
Generally, a market valuation or appraisal serves as a price guide based on recent prices for similar properties in an area. A real estate agent can advise on market prices, or you can check online real estate portals for the going rate of particular real estate.
Various Variables Impact Property Values
Valuers don’t simply pull figures out of thin air. They must visit and assess the property in question and weigh various elements before preparing a report detailing their findings. These factors include:
- Location – A property’s market position and proximity to amenities like schools or transport links usually affect its value.
- Physical attributes – The size and condition of a house or commercial building, including repairs needed to bring it up to standard, have a say in its value.
- Competition – How many other properties with similar features are available on the market? And what’s their going rate? If demand for a particular property is high, expect to pay more.
- Economic trends – A booming economy usually boosts property values. Conversely, a slower economy implies the housing or property market may struggle as fewer buyers are willing or able to invest in real estate.
- Legal considerations – Issues such as boundary disputes or land titles can lead to long-drawn court cases that may further reduce a property’s value.
You Can Object to a Low Valuation
It pays to ensure an accurate valuation of your property. If you believe your property’s valuation is too low, you may file a formal objection with the relevant government agency.
Alternatively, seek two formal valuations from knowledgeable valuers. This can help you determine the fair value of your estate and may give you a better chance of succeeding in your objection. Even so, the process can be complex and time-consuming.
Property valuation requires attention to detail and an analytical mindset – plus lots of research and data crunching. If you plan to get a mortgage, acquire, or sell a property, a valuer would be your ideal option. They can account for all the variables affecting the property’s value and present a fair assessment.
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