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The Importance of a Valuer when Purchasing an Investment Property

Tuesday, September 09, 2014

A valuer can be the linchpin to the transaction.  A valuer can make or break the transaction.

A valuer is used to assess the market value of a property.

The first thing to look for when appointing a valuer is to ensure they have the correct accreditation.  You need a valuer who can provide reliable, accredited assessments on the value of all types of real estate property.

When will you need a valuer?

If you are applying for finance your bank or lender may require a valuation of your existing assets to ensure they are able to calculate the actual equity you have within your real estate investments.

The bank providing finance will usually require the usage of their own valuers and they will generally err on the side of caution when making a valuation of your existing assets to ensure they are well-covered when offering you loaned money.

Valuers use a combination of market information, land values, development investigations and other analysis techniques to come about the valuation for the property.

Why do I say Valuers are the lynchpin?

The sale of a property is often dependent on the valuer.  Often the purchaser needs to raise finance against the property being purchased and possibly against their existing properties.  If the valuation on the properties fall short than the purchaser if often unable to raise enough finance.  Also a purchaser may decide to back out of a purchase if the valuer says that the property is worth less than the sales price.

So why aren’t valuation precise?

Valuations are an ‘INEXACT SCIENCE’.  There is no set value for a property.  The value is heavily dependent on the individual expertise and opinion of the selected valuer.

Valuers are poorly paid and need to do many valuations.  Pumping them out quick is the only goal.  They don’t take the time to examine all of the specific aspects of a property that add value. To make matters worse, the Global Financial Crisis (GFC) has caused lenders concern and lenders are specifically instructing valuers to value properties at FIRE SALE value as this reduces the lenders exposure to loss. Fire sale value is what the properyy would sell for in a quick, urgent sale and this is often far less than the achievable sale price in a normal market.

Valuers are also protecting themselves from personal litigation by adopting a conservative. 

How to possibly avoid a bad valuation on a property you are selling:

  • Try to develop a personal relationship with a valuer in the area
  • Sometimes it is possible to request the bank to use your chosen valuer
  • In any event, prepare a report for the valuer that contains
    • The house plans
    • Photos of all the special features of the house
    • A list of all the special features of the house that add value
    • Most importantly – a summary of comparable sales in the area that support the estimate of value that you are aiming to achieve
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