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What is a valuer? Rent to live, buy to invest

What is a valuer? These people are finding out.

A licensed property valuer who can value your home is a crucial part of any real estate transaction regardless of whether you are buying, selling or renting out your property.

What is a valuer and why do you need one? When you try to value your home, undervaluing the property 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. If you do this when are working out the value of property, 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 determine the value of property prior to purchase. Finding someone who knows how to value investment property is advantageous for this reason.

Many banks will use their own selection of property valuers but it is often a good idea to do your own research so you have a better idea of the value of property and what to expect and if you are going to have an independent valuation carried out, by a property valuer of your own choice, it is important to do so before you sign on the dotted line for a rental property.

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

What is a valuer going to do? The role of a 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. 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. All of these aspects help them 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 that a good property valuer will consider when they value your home.

Combining all these factors and the recent sales activity of the area, the property valuer will come to a valuation price for the rental property. 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 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 how to value investment property in the area and has carried out several recent valuations in the same or surrounding suburbs. Valuers who have a tight grasp of the local area provide more accurate figures when the valuate the properties for rent.

Always make sure they are accredited and licensed.  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 Perth rental property is worth but their estimate will not be legally accepted by banks or lenders.

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, if you have a property for rent, do your own research to see how the official valuation compares to how you value your home. Knowledge is power and the more you know about the process the better educated and experienced you will be for future property transactions. 

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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.