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How to value investment property: What is the role of a licensed valuer?

This couple are seeking the help of a valuer who knows how to value investment property

Having a property accurately valued by a licensed property valuer is a crucial part of any real estate transaction regardless of whether you are buying or selling, but what is a valuer?

Finding the value of property can be a tightrope walk. Undervaluing the home could lead to the lender feeling the property does not provide adequate security for the loan, breeching the loan-to-value ratio and thus limiting the amount you can borrow. You may also be liable for mortgage insurance if you are generally borrowing more than 80% of the value of the home and this is just one of the many reasons why you may wish to consider enlisting a professional, licensed property valuer to value your home prior to purchase.

Many banks will use their own selection of property valuers to value your home but it is often a good idea to do your own research so you know how to value investment property and have a better idea of what to expect and if you are going to find the value of property, with a property valuer of your own choice, it is important to do so before you sign on the dotted line.

An experienced and competent licensed valuer will know how to value investment property and have a fair understanding and knowledge of a particular area and will start by searching for completed sales of comparable properties to value your home. With constantly fluctuating market conditions, these sales need to be recent transactions and preferably within the past six months to determine the value of property.

What is a valuer going to do? The role of property valuer is to conduct a full inspection of the internal and external areas of the property taking into consideration house and land size, aspect, house design, the age of the home and its presentation to determine the value of property. The property valuer should also consider the proximity of the home to amenities such as schools, shopping precincts and public transport will also have an impact on the final valuation when they value your home.

Then there’s the cosmetic appeal of the home – is it of modern style, has it been recently renovated and is it well maintained? These are all important factors they need when determining how to value investment property.

Combining all these factors and the recent sales activity of the area, the property valuer will come to a valuation price when they value your home. If the property is being used as an investment, an investment yield will be applied to work out a rental income which will then be discounted to work out a market value when they work out a value of property.

If you are enlisting the services of an independent licensed property valuer (many lenders will send their own), there are a few things to keep in mind when searching for one.

Make sure your chosen property valuer knows the area and has carried out several recent valuations in the same or surrounding suburbs before they value your home. Valuers who have a tight grasp of the local area provide more accurate figures when finding the value of property.

Always make sure they are accredited and licensed. What is a valuer without qualificiations? Licensed valuers must take legal responsibility for their work and a valuation may be a requirement if you are borrowing 80% or more of the purchase price. Real estate agents and unlicensed property valuers are great if you just want to know an estimated value of what a property is worth but their estimate will not be legally accepted by banks or lenders when they value your home.

Also compare fees before you appoint a property valuer to make sure the cost is fair in the current and market and finally, don’t be afraid to pay it! It may be undesirable to pay another fee during the property purchasing process but the upfront cost to confirm the value of property may save you thousands of dollars down the track if you make an incorrect guess.

Finally, do your own research to see how the official valuation compares to what you think the home is worth. Knowledge is power and the more you know about how to value investment property the better educated and experienced you will be for future property transactions. 

Still asking “what is a valuer”? Contact our team of Property Investment Specialists today.

DISCLAIMER: This information is of a general nature only and does not constitute professional advice. We strongly recommend that you seek your own professional advice in relation to your particular circumstances.