Independent Property Valuation
Property is a complicated business. The needs and conditions of the market change every day. The savvy investor has to keep up with this pace. As anyone with experience will tell you, it’s best not to go in it alone.
What does this mean for the value of your investment then? Above all, you’ll be needing the services of a certified property valuer in Melbourne.
These professionals are better trained than any to calculate the value of your property. Their methods are approved by the Australian Property Institute (API). What this means for you is an unbiased determination of value. Whether that be current or retrospective value.
Your valuer is guaranteed to have at least 2 years of real-world experience completing valuations. In addition, they’ve completed the highly regarded coursework and training provided by the API.
They employ any combination of the following methods:
- the comparison approach
- the income approach
- the cost summation approach
- and the building cost replacement approach
These apply across the likes of litigation, capital gains tax and pre-purchase/pre-sale valuations.
Certain types of valuations (used for court, mediation, disputes, etc.) could be completed as either:
- a short form
- or a long-form report
Understanding the distinctive features of these services is your first step in making smart investment decisions. You’ll also want to know a little more about what qualifies your valuer.
Methods for the Independent Valuation of Property
Different properties, conditions and areas call for different methods. When it comes to deciding how to value your assets, your licensed property valuer is geared to make all the right decisions.
Your valuation may call for any combination of several methods.
The comparison method is perhaps the most common. Essentially, this comes down to determining a purchasing price based on similar sales. This is of course subject to the principle of supply and demand.
Supply and demand can be affected by:
-
comparable prices in the market
the abundance of available land, building materials, labour and more
or the methods and materials involved in construction.
The income method is a little different. It’s generally seen as a secondary approach. This approach calculates the value of your asset by way of the income it produces.
Alternatively, this is known as the income capitalisation approach. Your valuer will divide the net operating income by capitalisation forming your asset’s current market value.
Last off is the cost summation and building cost replacement methods. These are very similar overall. Cost summation involves the addition of the underlying land value to the cost of any improvements made. Building cost replacement refers to the process of calculating the cost of building an entirely identical property.
Short Form Vs Long Form Valuations Reports
Your valuation report is a highly detailed document illustrating the entire valuation process. This will describe the value calculated and the steps taken to get there. It includes an abundance of local property data only accessible from the databases used by certified valuers.
Better yet, these reports cover you for a wide range of tax, legal and administrative needs. They’re your first and last reference concerning an asset’s value. Some are even customisable as short or long-form reports.
They may involve different methods or prepare you and your property for different situations. A short-form report primarily includes an exhaustive review of the asset in question. This will cover you for buying and selling but is not admissible to the courts.
It includes:
- an evaluation of your property, its condition, and the surrounding area
- a detailed comparison against other local sales
- a description of any relevant environmental risks
- and a review of market volatility
Similarly, a long-form report contains details on similar sales, the market, and the subject property. The difference is its adherence to various legal standards. Long-form reports are admissible to court and used in litigation, family law and commercial property matters.
Who’s Most Qualified to Perform a Valuation?
Your best bet is a Certified Practising Valuer (or CPV). Secondly, a member of the Australian Property Institute. This combination guarantees an unbiased approach based on highly regulated standards.
Furthermore, API members are subject to continuous professional training.
You may be wondering: why not a bank valuation or real estate appraisal? Both come equipped with their own lanes of expertise and methods.
The difference is that neither is impartial. Banks work on behalf of lenders. They carry out valuations to lessen the lender’s risk when issuing a loan. Real estate agents, on the other hand, perform appraisals to drive the sale or purchase of a property. They have a vested interest in that process and cannot claim objectivity.
Only a CPV can, by the standards of Australia’s most lauded property institute, give you that guarantee.
Closing Thoughts on Property Valuation
Safe to say, there’s a lot to consider with your next property valuation. Do you request a short or long-form report? Perhaps you were considering a real estate agent’s appraisal.
Don’t forget, Certified Practising Valuers are uniquely qualified. They work according to the proven methods and standards established by the API to ensure fast turnaround times and total accuracy. Each one has fulfilled the API’s challenging requirements for experience and training to gear them for this complex, rapidly changing market.
Once more, they are detached from the final value of your property. This ensures objectivity.
When calculating your assets value, independent property valuers will:
- compare your property to similar nearby sales (the comparison approach)
- use income generated to determine a value (the income approach)
- divide income by market value
- add the cost of the land to the cost of any improvements (the cost summation approach)
- or calculate the full cost of building the asset (the building cost replacement approach)
To learn more, or receive a free quote, get in touch with one of our qualified valuers today.