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The Value of a Valuation
Many people know the basics of what can impact the value of their property - overhead power lines and busy roads versus sea/tree views and a short stroll to the local coffee shop. To gain a better idea of how to improve the value of your property, it is worthwhile taking a look at what a professional valuer looks for when inspecting a property and how they arrive at the valuation figure. The field of property valuations is often described as an art and not a science, as it takes into consideration so many tangible and intangible aspects of a property and its surrounds. Valuations are a professional opinion based on available evidence; valuers do not set new benchmarks. They must be guided by what has sold recently, that is, within the past three to six months. The valuation process starts with a physical inspection of the property. The valuer walks around and through the property taking measurements and note of the number and type of rooms, fixtures and fittings, and improvements. The valuer then employs three methods to further analyse the property in order to come up with a value range: direct comparison, summation, and capitalisation of net income methods. The direct comparison method involves researching recent sales of similar properties in the immediate surrounds, referred to as `comparable sales'. The subtle and not so subtle differences are taken into consideration to determine the extent to which these comparable sales can be used as a guide to the value of the subject property. In this way, apples are compared with apples and necessary adjustments can be made for the bruises. The summation method is the land value plus the depreciated value of improvements, which comprises the dwelling plus ancillary features such as garage, pergola and swimming pool. Land value takes into consideration size, shape, topography, slope, location and surrounding infrastructure and amenities. The value of improvements incorporates the style, age, architectural features, layout, number and purpose of rooms, and renovations in addition to the overall appearance and condition. The combination of these two methods allows the valuer to arrive at a valuation range. It is then up to the skill and experience of the valuer to consider any risks associated with the property or its location to be able to refine the valuation figure. The valuer may also check these values by way of capitalising net income. This involves applying an investment yields to assessed market rental of the property to derive the current market value. This method is commonly used when valuing investment properties. Another important tip is to ensure your valuer has the skill and experience required to provide you with an accurate and reliable valuation. Only use a qualified and licensed valuer who maintains membership of the Australian Property Institute. Valuations are required or useful for many purposes including property financing and refinancing, accounting applications such as calculating stamp duty, GST or capital gains tax, rental determinations for investment properties, and family law purposes. An independent valuation before you buy or sell a property can help you negotiate the best price, reduce your risk and save you money. About WBP Property Group Patrick Brady AAPI is National Director of WBP Property Group, providing a complete suite of property services Australia-wide from property valuations to tax-depreciation schedules. With extensive experience in the property and valuation industries, Patrick regularly provides property value and market advice to corporate and private investors as well as the media. Related Articles: Estate Agents Are Not Valuers
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