Valuations: more than price

We all know that valuations are a standard practice when applying for finance, whether purchase or refinance financiers request valuations to ensure they are not lending more against a property than it is worth. However there is many other considerations to a property valuation than just price.

The 8 key considerations are separated into 2 subcategories, Property & Market.

Property considerations

1. Location & Neighbourhood – Refers to the quality of the neighbourhood combined with the location with respect to amenities and facilities. Key factors are, distance to schools & shops, surrounding zoning (not adjacent to industrial land); negative stigma to area & stable sales market.

2. Land (inc. planning title) - Land in this instance refers not only to the land physically, but also to access, services, planning and title. Key factors are, good vehicle access; shape of a block; slope of the block; encumbrances or easements & utility connections.

3. Environmental Issues - Covers a range of environmental issues including any significant, observable, visual and/or known defects, hazards or site contamination. Key factors are, flooding; storm surge; bushfires; wildlife infestation; coastal erosion & pollution.

4. Improvements - Refers to all improvements, whether the main building or ancillary improvements. Key factors are, age of construction; sound layout, design & appearance; fair wear and tear; evidence of damage, termites or asbestos & major structural issues

Market considerations

1. Recent market direction - A brief note of the recent direction (and strength) of movement in prices.

2. Market Volatility - The likelihood of adverse impact on the value of the property due to the market changing direction rapidly.

3. Local economy impact – The risk of fluctuations in the property value due to changes in the local economy.

4. Market Segment Conditions – The risk or impact of a particular market segment. E.g. Acreage, studio apartments, fully detached housing & units.

Whilst it is not the only consideration, the actual $ value of a property is of course still important, ensuring a buyer isn’t overpaying or a refinancer hasn’t over quoted their properties value. There is a common misconception that bank valuations are more conservative than when privately ordered.

This is simply not the case, the same valuer’s apply the same principals for both you and the bank when considering the market value of a property.

For advice, or to organise a valuation on your property, contact your preferred Mortgage Broker.