Property Valuation: What Determines It?
Property valuation in common terms is what a property is worth. Practically, it is the amount that someone pays for a property. The market value is a willing arm’s length transaction between a buyer and a seller after proper marketing of a property.
Property valuation is basically the initial step in anything that involves property. Be it for the banks to lend you money or refinancing your loan or even selling the property. This is why understanding the perks of property valuation is vital.
Well, every home is different, moreover the valuation of property changes with time. Here is what determines the valuation of a property, what banks use it for, and how to improve the valuation of your property.
How is a property valuation determined?
Usually, most residential property valuation is determined by a direct comparison of the property with the recent comparable sale. Adding to it, valuers also consider the following attributes.
- Location of the property
- Property size
- Land size
- Number and types of rooms
- Ease to access to the property
- Quality of the building
- Standard of the fit-out and property’s architectural style
- Fixtures and fittings
Considering these attributes, the valuers compare a particular property with the properties that have just been sold in the local area. The compared property is recommended to be within 1km, sold in the last 6 months, and similar to the property that is to be valued.
While looking for comparable property, you should keep its location, size, number of rooms, and standard of the property in mind. Both the properties should fall in similar criteria for you to have a tentative valuation of the property. Having a property as similar as possible is crucial, or else the final figure might just be inaccurate.
After listing out 3-5 similar properties, categorize them into whether the property is superior or inferior to your property. Doing so gives you a range for the value of your property.
However, keep in mind that if the comparable sales are more than the time duration of the latest 3 months, its valuation no longer marks an indication of the current market condition in the present market. Therefore, keep space for adjusting with the market movements and make adjustments accordingly.
Why do banks use property valuations?
Banks use the property valuation to make sure that they are lending you the money to you responsibly. When dealing with the bank regarding a property loan, the banks are required to make sure that they are not lending you more money than the value of the property.
The valuation of your property acts as security against your home loan. If in the future, you default on your repayments, the banks usually sell your property to pay back the loan. While doing so, the property is usually sold at a lower amount than what you’d ask for.
If you are selling your property to upgrade to a new one, you can ask the banks for property valuation. Usually, most of the banks offer such upfront valuation for free. This report valuation is valid for 90 days, and if no further action is taken before the deadline, you are required to present another updated valuation.
How to improve your property valuation?
For any of your plans, you might require to have a professional valuation of your property. While waiting for the property valuation to be completed might be stressful, you might also improve the valuation of your property by taking care of few simple things such as:
- Clean up your house making it spotless. This will allow the valuer to see your home in the best possible way.
- Keep everything at your home in the best condition. Repair and fix the problem if there is any.
- Present your home to the valuer in the best way possible. Few inexpensive additions can help a lot.
- You can also point out some recent additions of the house to the valuer when he/she is around inspecting your home.
- Ask for an on-site valuation for a better valuation of your property.
Well, a property valuation can often be daunting. Keep in mind that the valuation process is not an exact science and the market value is just a guide. Make room for adjustments. And if you ever feel the need for a second hand relating to any of the property decisions, CONTACT US right away.